It definitely looks good!
A bigger pot might be nice, that's right.
The substrate looks like it's all sand - you are right that is not the best substrate for San Pedro. They are not your typical cacti, they need more soil and not only sand. I got mine a special cactus substrate that is a mix of lava stones, soil, even some type of clay and other stuff (got it from a webshop specializing in cacti). The cacti seem to like it, but in my experience normal potting soil mixed with some sand and seramis is also good.
From what I can see it looks like you're in Europe somewhere, so don't worry about too much sun - that warning only applies to Arizona, Mexiko or Israel. In most parts of Europe it's best to move them to the sunniest place you can find!
As long as enough sun is there, give it plenty of water and some cactus fertilizer. The best water is always natural rainwater, try to use that as much as possible. It's too much water when the substrate doesn't dry every day or two. You'll also notice the cactus grows thin when the sun/water ratio is too much water and not enough sun.