If you don't make John and Cathy parents of Henry, all is well for reports showing or suggesting the birth relationship. The problem arises when you have both Mary and the unknown sperm donor as parents and John and Cathy, regardless of the type of parental relationship you select. The Pedigree View and Chart and the Ancestors report will show only the parents checked off in the main screen Parents drop-down list box. The Descendants report will show Henry as a child of both sets of parents with no distinction. The Individual Summary does show both sets of parents but the non-birth parents have a suffix showing the type of relationship; that's good - it should be the case everywhere and it's not for the FGS of John and Cathy.
Apart from RM getting fixed to show the relationship type in all reports, I think the best thing to do is unlink Henry from John and Cathy and use a MISC or custom fact to describe the arrangement as you understand it. You could also revise the Birth fact to include the Description field and then customise the sentence template either for that fact type or for the rare occurrence such as this one where you need to incorporate the description. The description will come out in the Indiv Summary and the FGS anyway and the sentence in the narrative reports. One suggestion for the custom Birth sentence is:
[person]< was [Desc],| was born>< [Date]>< [PlaceDetails]>< [Place]>.
When you put into the Description:
"born to Mary, but raised in the family of his grandparents, John and Cathy",
the sentence comes out:
"Henry John was born to Mary, but raised in the family of his grandparents, John and Cathy, in 1967 in Somewhere, County, Prov."
I'm sure Laura will have better suggestions but there's a start.
Edit: I knew it! Laura and I were composing at the same time... so you have two suggestions and maybe it would be wise to combine them.