He can apply to USAFA and USMA while on the Falcon scholarship. I'm pretty sure if he's then offered USMA and takes that, you would owe full tuition to the foundation/Junior College he attended (GMC, MMI, NMMI, or Northwest Prep). If he's offered USAFA and accepts the appointment, no money owed. Read the FF contract very carefully.
Let's not forget, there are SO many less freedoms being at a SA vs a traditional college. Does he want the traditional college experience, even if it's academically challenging and requires ROTC weekends? Or does he want to prepare for the SA at a Junior College? My guess is if he goes to U of I, as a reapplicant, he'd be a very qualified candidate. But as a Sponsored Civil Prep Cadet, he'll be better trained for the SA and it will be less of a shock when he gets there.
One last thing - he has to go through the nomination process all over again. No matter what route he chooses.
Good luck!