vandy/ethan - battles up a division are definitely not out of the question. its not just a genius or two who has done it either, people win up a division all the time. ok, less than the guys up a division win :) but still. i would say i have, in my entire d2/d3, battled up a division at least once every 3 seasons. i probably have won 90% in the last couple years. so its very possible - you just have to pick your battles carefully. only battle if you can win, or, if the guy is so good you just don't care, and think its worth the risk of losing for the chance of winning.
this, of course, begs the question - how do you know you can win up a division? well, in d2 vs d3, money is not much different, so its often possible. by counting scholarships and distance, you can often get a good gauge. but, the most important thing is - what do you think of the other coach? i rarely battle a coach i expect to make the right move. i usually am stealing players off of guys who clearly don't know what they are doing - i mean, if they did know, would a guy with a huge prestige advantage and 15K per scholarship to your 5k every lose? no. well, sometimes. but usually no.
i recommend, as always, experimenting. only one way to learn! well thats not true... but there is no substitute for experience. i sure lost a lot of these battle-a-division-up tries, when i was learning. like, all of them? maybe not all but close? but was it worth it? you betcha! look on my SIUE team... potential national champion... both ATCHLEY and THE BUGE were taken off d1 schools. one human, one sim. usually i only battle d1 sims, the advantage of humans is too great. but d2/d3, i battle humans like its my job. in my last 10 seasons at d3 i probably battled 8 d2 schools. really, if you aren't david battling goliath, is it fun to win? yes, yes it is. but not as fun :)