A common method of getting tomatoes from seed to ready to transplant outside is up-potting. Start them in small pots and when they get some true leaves (yours will work) put them into a bigger pot. If they outgrow that pot move them to an even bigger pot. You might do that two or three times before they go out to the garden. Several people over on the sister gardening forum are dong that now. That's a real common method, especially for people so good I call them pros.
One of the reasons for up-potting is that the roots need room to grow too. You can add dirt up on the stem the way you are talking about, but I think in that little cup they are going to get root bound.
People tend to like photos so I'll show my starter set-up. I don't do things a normal way. I start my seeds fairly close to the bottom of this bin. (It is set up so it can drain.) I cut rings from small yogurt cups and use those to show which variety is which. Instead of up-potting I add dirt to the top as they grow and move the rings up so I can tell which variety is which. That gives the roots room to grow.
Sometimes the tomato plants are about 18" tall when I set them out. I use post hole diggers and set them down so deep only a half dozen leaves are showing. If you dig those plants up at the end of the season you can see where roots have grown all along the stem, though they concentrate at what was leaf nodes.
You may notice the white paper at the sides of this. That's to reflect light back in from all directions instead of them just getting light from the top. Mine don't get nearly as leggy as they did before I put up that paper.
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Canoe, that can be a fun experiment. At the end of the season dig up some of the stuff you transplanted and see how the roots grew. Not just tomatoes, other plants. It might change how you transplant some of them.