Waynek, I think you kind of answered the question for yourself. You mention that your son has a nice scolarship package at your local university, and it might be improved upon. If he's happy going there and parents support his choice, you are most likely done with his college search. You also obviously have a concern about being straight up with the juco coach, or you wouldn't be asking for advice. That says a lot about your character.
I think you probably represent yourself in the best manner, and will be at peace with yourself, if you tell the juco coach your son's situation and explain that if it doesn't work out or if son changes his mind about attending college in his hometown, that his juco will be right at the forefront of schools son would consider. There is nothing wrong with telling him that your son will most likely be attending the local school, especially since he's got scolarship money on offer. You've already said his college choice will be about more than just baseball, so the choice should be easier.