Mountain Bike for 10 Year Old Boy

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My son is about to turn 10 and he wants a mountain bike.. I have a Garry Fisher that I don't ride enough and we both want to hit the trails this spring..

He has test ridden some 24" youth mountain bikes, but they look small on him.. He's tall for 10. (about a 26" inseam).. Local bike shop that most serious cyclists shop at here says get him an adult bike with 26" wheels and a smaller frame that fits his body.. Then he will not outgrow it.. They are suggesting a Trek 3700 to get him going.. What is the best minimum clearance above the top bar? I say 2 ", but the bike shop guy says we could go closer (not his family's jewels there)

Been reading the forums about handle bar height and seat height too..

I definitely don't want him to havetoo much for him, but also don't want him scrunched up on a kid's bike like he was with the one's he tested.

The Trek comes in different tube sizes too..

Anybody been here before??? Any ideas or help would be approeciated.

The general rule says at least 2" clearance but thats a general rule. If he will be riding more technical terrain more is better, being 10 he will probably be more ambitious with technical stuff. Then again the clearance will probably increase quickly as he grows in the next couple years.
A 26"cher with smaller frame is a good idea. he will probably grow quite a bit by the time he is 12-13. If that is the case you can just upgrade to a larger frame and transfer most components considering they are in good order. I am not sure what youth bike is like but you could probably customize an adult bike to fit alot better while he is still growing.

I've seen many a kid ridding a bike that will take him at least two years to grow into.The parent on the other hand has a state of the art bike with top class gear to match.And you proberlly find the kid rides his bike more often.
My (shake my head gripe)is the poor braking on many lower end bikes.
Most important facter i recon is the stopping ability.
But you seem to have his safety interest at heart,good luck and happy cycling.:)