I'm reposting the language on Taxi Squad eligibility from our rules because it is a little confusing and is not specifically enforced by MFL's software.

A 5-slot taxi squad is also available for players under development. A player may only be placed on the taxi squad in their rookie year (we made an exception for the first year of our league). Once on the taxi squad, a player may be held there for three seasons. Any year 1 player promoted from the taxi squad to the regular roster, and placed in a starting lineup, may never be placed back on a taxi squad by any team. Any player in years 2-3 placed on the regular roster (this does not include IR) may never be placed back on a taxi squad by any team. For the purposes of this rule, there is no regular roster from the period after the super bowl until roster cutdowns are due.

So we can promote a year one player to the regular roster and demote back to the TS as long he was never placed in a starting lineup?

Yes.