Do you really know if the coaching is excellent? An ex-D1 player is probably knowledgeable about baseball generally, but isn't necessarily a good youth baseball coach or necessarily one who understands hitting or pitching technique.
In general, good coaching is more important than the level of the team, but truthfully AA ball in California (assuming you mean the USSSA rating system) is mostly made up of kids who won't play in high school. At least that was the case a few years ago. If your son has significantly more talent (I mean athletic ability, not developed skill) than his teammates, then even very good coaches may have trouble teaching him effectively in a group context.
From what I've seen, excellent coaches want to coach boys who they think have the potential to do well. So it may make sense to look at higher level teams. By the way, three of the best coaches I have encountered were dads who had not played past high school. I wouldn't reject a team on that basis alone, although there are plenty of dads doing a pretty poor job of coaching.