I know there are a lot of proofs out there for the well-ordering principle already. As an exercise, I thought I'd try to prove it differently. My attempt is as follows. Would appreciate any feedback!
Prove: Every non-empty subset of the natural numbers, S, has a minimum, min(S), such that min(S) is less than or equal to all s in S.
Let Sn denote a subset (of the natural numbers) of cardinality n.
(Base case) n = 1: S contains exactly one element, x. Clearly, x is less than or equal to all s in S.
(Inductive step) Suppose inductively that min(Sn) is well-defined. It can be shown that min(Sn+1) is also well-defined. In particular, Sn+1 can be written as Sn U S1. min(S1) and min(Sn) are both well-defined. There are three possible relationships between min(S1) and min(Sn): <, =, >. If min(S1) < min(Sn), then min(S1) is less than or equal to every element in S1 and Sn and is therefore less than or equal to every element in Sn+1. [Perform the same analysis on each of the two other cases]
QED
Often times, the problem people have with induction is that they don't have a clearly stated proposition they are using an inductive argument to prove.
Your attempt at the problem appears to be trying to prove the proposition
And to fix up your inductive step, start by saying something like
Then use $U$ and $V$ everywhere you write $S_n$ and $S_1$.
Once you've done that... you may have a correct proof of $P_{n+1}$. But it's terse and missing many details. On the one hand, it's the sort of thing I'd accept from my colleagues because I think it's clear how to fill in the details (and I imagine it's also clear to my colleagues). But on the other hand, I'm not sure that I would accept it from a student who is learning about proofs and is having trouble with the details, because I strongly suspect that the details are omitted because they don't understand how to fill them in, and at best only understand the intuitive idea.
But let's say you do have a correct proof, so that by induction, $P_n$ holds for every $n$. This still doesn't prove the theorem you were trying to prove, however — you can conclude that every finite set has a minimum, but it still leaves open whether or not an infinite set has a minimum.
Ultimately, you need to mix in a new idea to complete the proof.