Just like running on a treadmill isn't that good for people, I imagine it wouldn't be that good for horses either.
The fact that the belt moves whether or not you choose to walk is a nice way to jar up your joints after tons of repetitive use. The body doesn't always keep up with the treadmill and sometimes your legs start to get pushed back instead of you pushing off. You let the treadmill do the work, but you end up having more jarring steps when your foot hits the moving belt. Overall its not exactly good for you.
I wouldn't subject my horse to an exercise routine. For the sake of research and studying the horse for medical purposes, but general exercise....I have no problem with.
Lunging is bad on joints as well and shouldn't be used to build muscle. Especially on a young horse. I would suggest ponying off another horse and doing some trots if you want to start exercising. Otherwise I'm with the others in saying just wait until he is mature enough to break, then worry about building muscle.
Out of curiosity though, what type of stable do you board at where you have access to a treadmill? o.0