There's a thread over on the dining board about this called "We knew it was coming..." I'm on my phone and don't know how to link to it, but it shouldn't be too hard to find. It seems like they tested this at a couple of restaurants for a short time in August, then started letting the characters sign again. I went in late August to CRT, Garden Grill, Bon Voyage breakfast, Tusker House, and Crystal Palace and characters signed at all of them. The thread I mentioned has more recent reports of characters signing as well. To my knowledge, no one has posted recently that the characters wouldn't sign when they went.
My DS was just shy of 2 and we had no idea how he would be with the characters either. A couple months before the trip, I started showing him videos on YouTube of different character meet and greets to give him an idea of what the characters would like. He absolutely loved watching them- they seriously held his attention better than any cartoon and he'd get upset with me when the videos were over. When we got to Disney, he loved the characters. He had no interest in the princesses (he's not really familiar with them anyway), but he loved the animal characters (Mickey, Pooh, etc). Some of them he had never seen before in cartoons or videos, like Pooh and friends and Chip n Dale, but he went right up to them with big hugs too, and he's normally a very shy kid. He doesn't even like his dad hugging him half the time!
Anyway, the character meals were great for us. Garden Grill had the best character interaction. We saw Mickey, Dale, and Pluto twice, Chip once and the second time Pluto came around, he played with DS for around 10 mins. They played peek-a-boo, gave each other a million hugs, pointed out scenes from Living with the Land, and had a conversation only the two of them understood (DS babbling incoherently and Pluto making gestures). I doubt we would have met many characters had we not booked the meals.
All that being said, DS did really enjoy HDD, Raglan Road, Ohana (dinner), and TRex as well. I don't know how many restaurants you're booking, but I would personally go for a mix of character meals and others like HDD. Also consider showing him YouTube videos of the character meets to familiarize him a little with the look and size of the characters. If after going to your first character meal you find that he is afraid of the characters, you can always cancel the others and try to book something else.
I really hope it all works out for you and your son loves the characters as much as mine did.
