Does Frazier have bat enough to play in AA next year? He might. And how long does he stay at SS? He's a fascinating complication.
My guess is that Frazier starts in Dayton if Valaika is still around. I really think the Reds will err on the side of conservatism when it comes to where they put guys in A ball -- they want to have a good team in Dayton -- it's really their signature minor league affiliate and squarely inside Reds country -- plus it's a great place to play. So, while Frazier may be overqualified to play there (and I think you may be right that he could survive in AA), he's going to have a lot of fun excelling in front of 8000+ there every night for part of the year. In this scenario, he stays at SS.

Ultimately, I'd love to see him get a shot at 1B -- with his athleticism and size, he could turn out to be a heckuva defensive asset over there.