Personally, I believe if a coach has the majority (all is the goal) of his players return the following year, then he did most of his job. Kids at that age should learn the FUNdamentals of the game. With that said, and I don't know how your league conducts the draft, but was your son on the coaches tryout draft list, or possibly assigned your son to his team by the league?
Again, my goal isn't to offend, as i've been head coaching multiple teams (I have 3 sons who play at different age levels)football, basketball, and baseball. So sometimes a coach sees things from a slightly different angle than a parent. I was assigned 2 9 year olds on my team this year (my team has 10 players--8 returning). The 2 players actually went up to bat and stood on the middle of the plate during their turn to bat at tryouts. They new absolutely nothing about throwing, hitting, or running. We get an 1 hour and 15 mins to practice 2 times a week, so obviously dedicating time to 1-3 slow kids is not realistic.
Here's the problem. The vast majority of our kids have been practicing\playing since they could hold a $5 Wal-Mart wiffle bat and ball. The 2 new kids just decided to give baseball a "go". I knew both parents from years of coaching in a basketball league. They never exposed their kids to baseball in any way, then decided to sign them up and figured that a team with only a few hours of practice time a week could do wonders with them.
A team cannot, and should not, practice at the level of their 2 slowest players! This is a parent responsibility, a responsibility to NOT put their kids, vastly unprepared kids, in a position to fail. I believe if a parent has $50-$80-or $100 to sign their child up and buy new equipment, then a little bit more money would go a long way in private lessons or other alternatives.
I am not an "everyone should get a participation trophy at the end of the season" coach. I believe opportunity should be earned, yes, even at that age, just like we earned it when we were young. (back when not everyone made the team..kids today are taught that happiness is something that should be given to them, and not earned).
Coaches at this age should "train" their players for the day when they have to earn a spot on a team (middle school, JV, Varsity), and SHOULD make it fun for them at the same time.
Now I know it sounds like i'm agreeing with everything the coach did, although I do agree with parts of it, your son should still be able to play outfield for at least 2-3 innings in a 6 innings game, and should be batting at least once also.
But if I were a new baseball dad in a league with a C or D skilled son, I would make sure to give him tangible skills to succeed, before buying expensive equipment and sending them to a team.
Also, paying a registration fee does not mean you get a say in team rules and practices. I would definitely try to transfer your son to another team, and if possible, a team without many veteran returning players, so that he will be able to grow with kids of his equal caliber. They may not win much, but at leat he'll get the opportunity to play.