If your son can compete and will get playing time, then it would be ok to move him up.
If he's going to be pulling splinters out of his behind, then leave him down.
As far as the draft goes, when I ran a league we did evaluations just to get an idea of the kid's abilities. Then a week later we would do the draft. Everything was done by number.
I'd rather the coaches draft their teams so that hopefully the teams come up balanced and everybody can compete each game rather then 1 team of studs that decimate everybody else.
I would evaluate the coaches kids and assess a draft slot for them. Some kids I'd take the first pick and some was in the middle. Tried to make it where the teams were balanced.
We did the pick them out of a hat for a couple years before I took over and always had one team that wiped everybody out.