Instead of killing him, the Peacekeeper absorbed Toby like it did with the weapon bots.
Ergo, Astro blowing up the Peacekeeper means that he was really blowing up his predecessor.- That seems unlikely (given the different effect from any other absorptions), and would have likely been brought up in the film itself if that were the case.
The reboot will take place inside a computer, ala Mega Man Battle Network or Digimon.
In the movie, Grace knew about Astro being a robot the whole time.
Toby was a cyborg.
In the 2009 movie Astro Boy, we see Toby Tenma take a long rocket science quiz in about a minute. We can hear him flying through (non-multiple choice) questions– about one question per second. He proceeds to get 100% on it. Even as a prodigy, this shouldn't be possible. His father, Dr. Tenma, is the head of the Ministry of Science, and the leading expert on robotics. Because of this, I believe that Toby has brain cybernetics installed to enhance his intelligence. With his father in such a prestigious intellectual, Toby has a lot to live up to– and is in the perfect position to receive cybernetic upgrades that the general public might not be aware of. This also explains why Dr. Tenma is able to reconstruct his memories in the Astro Boy robot so easily– he possessed some of Toby's neural scans, from when the implants were installed. This would also add more depth to Tenma's insistence that his son is not a robot– as an intelligent public figure that built his career around subjugating robots, the fact that his "real" son needed robotic intelligence enhancers would be deeply embarassing.