1) He's not a good major league player now. The bat doesn't carry the lack of glove at 1B, and I'd want more bat than that at DH. Needs one or maybe even 2 seasons in the minors. He should be an impact bat in about 1.5 - 2 seasons, though.
2) You should focus more on patience when you hire coaches.
3) AAA this season, since that's the best coach. If you're not good and/or he's not quite ready next season, then a second season at AAA won't hurt his development.