I'm new to this forum and this is my first response actually. How old is he? Is he going to go insane if you 'change' his blanket around by fixing or replacing certain damanged parts? My son would have flipped out. Heres a thought.... if he likes it the way it is..... tie off or weave in any loose yarns that might cause strangulation and fix any soon to be loose strands.
You could always ask if he wants to donate that one to a baby that needs one....(ie, getting rid of it...) and then let him pick out new yarns for a new one...for a bigger better big boy blanket. Save his old one and fix it later when he's asleep and tuck it away for when he's older to give him back as a keepsake.