Your analysis is quite right. Based on reports I've heard, if you declare nystagmus your son may well be refused holiday insurance or charged a very high premium. If you don't declare it and you are unlucky enough to need to claim, the insurer may use nystagmus as a reason to dispute the claim.
However, in my opinion as a journalist who has written for many years about insurance, an insurer refusing a claim would have to prove that nystagmus led to the reason for the claim. However, that may not be much consolation to you if the claim is disputed.
I've never declared nystagmus when taking out holiday insurance, because I agree with you that in most cases it is not relevant. Insurers of course may disagree.
One option open to you is to contact the Association of British Insurers (ABI) and ask their opinion. I cannot say how helpful or otherwise they would be.
I'd like to hear other people's experiences of insurance and nystagmus. If we can gather enough evidence, then I would be happy to contact the ABI and write an article for NN's Focus newsletter.