I'd wait to transplant until it had alot of roots. MJ likes to "step up" in pot sizes. def poke some holes, I poke 8, 4 in the bottom, 4 in the sides around the bottom. yeah the soil will settle a little bit, just trim off the top of the cups. you can move up to 2 liter bottles when you're ready, just paint them black or duct tape em' up to keep light out.:thumbsup: