Good for reporting her. You pulled him out with there still two weeks in March and those two weeks were paid up so it is pay in lieu of written notice. Not sure how much notice was required in your contract but there are certainly extenuating circumstances. By the time she is inspected she won't have the heart to take it to small claims court because she will either be closing her doors or spending all of her time making changes to her daycare to comply with the rules.

Something you might want to do is ask you new caregiver to write down any comment your son makes about his old daycare in the sense of it would just be the random thoughts of a 3 year old but put togehter with what is found might shed some light on what was going on there. She is also an outsider and not him telling you what he things you want to hear. Such at snack time if she just randomly asks him so XXXX what did you used to have for snack at your old caregiver's.