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To raise his paper level you'll need to give him a breeding boost. I think they can have 5 in total.

C means he's not a fail, so good enough to breed from. However there are gradients in the paper levels and you'll need to comparison test to see where he is, I believe. If you have a known low B papered and he tests AGA, then you'll know that he is a high C.

C is not bad at all for a foundation in fact that is what you will get for any foundation that is not rank special.

Remember, too, it's not a race. I've been over here for a year, come the end of March, and I am just getting my 3rd gens going the directions I want them to go. You aren't likely to get a B papered superior to sire colt on your first outing (with basic foundations). That random score combination that makes a foal has an awful lot of wiggle room for 'equal too', or 'not as good as parents' scores, and only some 'better than' wiggle room!

Sure, you can start off buying all the best stallions and all the best mares, but to me that seems to cut out the most interesting part: figuring it out for yourself! :D