3) Entering a class beyond one's skill set just adds another level of pressure which can ruin airplanes or worse: have one loose interest in the sport.
By that logic, there's about ten guys flying in Expert in the Pacific Northwest should never have moved out of advanced, because we always have Paul, Alan, Chris and Howard there to take 1st, 2nd, 3rd and 4th (usually in that order).
Which, of course, means that all of the guys currently flying advanced would never have a chance to win, so they should have stayed in intermediate. Actually, only half a dozen of the current expert crop would have a chance to win this newly-reconfigured advanced, so the rest of them should move down to intermediate, too.
Which, of course, means that now there's a dozen guys in intermediate, only half of which can ever trophy, so the rest should have just stayed in beginner.
Which would leave us with over a dozen REALLY REALLY GOOD FLIERS in beginner, and a newcomer would never have a chance to win, would get discouraged, and would quit.
I see what you're saying about beginner being a good place to learn contesting, and on reflection I think you may be right. Certainly (now that I think about it) one of my frustrations in my Beginner Year was always doing much worse at contests than I did in practice. It wasn't until I was about halfway up the ladder in intermediate that I got to the point where I was flying about as well in competition as at the practice field.
But clearly, I disagree with you about when to move up. I don't think you should wait to enter a class until you have a chance to win -- I think you should enter that class when you're flying well enough to come in about the middle of the pack, or if you're consistently placing 1st or 2nd in the class you're in, or if you think (as I did when I moved up to intermediate, and again this year when I moved to -- essentially -- the bottom of expert) that you'll advance quicker in the next class up. In Shug's case, I see him progressing fast enough that I think that, while he won't have a chance at getting a trophy in his first contest, I think that he has a better chance of being further along this time next year if he starts in intermediate now (except, of course, for the little details about not tripping over fellow competitor's lines, and engine management, etc.)