Batter Interference on Squeeze Bunt?
 

1 out man on thrid - 1-0 count on batter - he attemps a squueze bunt but misses - the catcher moves up to make a play on the runner coming home. The batter does not move out of the way and hinders the catcher. I call the batter out for interference and the runner out. The coach argues that the batter has a right to stay in the box. I quote rule 2-21-1a and 7-3-5c and d
You make the call? - The batter also hit the catcher in the face mask with his bat while holding it out attempting to bunt.

I think this is a HTBT sitch.
Sounds like F2 ran into the bat. If batter is attempting a bunt and F2 comes out of his crouch as he's making the catch you can't expect the batter to move out that quickly. This could just be incidental contact.
Once you do call interference, I don't think you get two outs out of it.
Less than 2 outs R3 is out and all other runners, if any, return to TOP base.
With two outs, batter is out.
The batter may not have the right to stay in the box, but he is allowed a reasonable opportunity to vacate and that is totally your judgement.

From the info you supplied and not having been there, it would be next to impossible to "make the call."

What rulebook are you pulling numbers from, HS?

Was there "time for the batter to move away" (7.3.5d)

Did the catcher move into the batters bat moving up or did the batter intentionally hit the catcher in the mask? If the batter was attempting to bunt, why would he/she not be looking at the ball.? In that case, I question wether the batter was trying to hit the catcher or the ball. Maybe you could help us out?

Rule 7.3.5 Penalty, states that the "runner is out" with less than 2 outs for batter interference, not the batter.

This part sounds like catcher's obstruction/interference (depending on whether this is a OBR/FED game). If F2 interferes with the batter's opportunity to bunt, then that should be the call. Subsequent action should be ruled according to the CO/CI rule.

If the batter attempted a bunt and his actions afterwards weer the same as any "bunt and miss" (basically staying still), then it likely was not interference.