I came across a poem by the English poet John Milton titled "On
Shakespeare". It contained a verse: "Under a star-y-pointing pyramid".
I am doing research on the history of the letter "Y",
and wanted to know:

a) What does "star-y-pointing pyramid" exactly mean?

b) Why was it given this name?

c) What does th "-y-" signify?

I need as authorative a source as possible.

First, here are some websites:

http://www.dartmouth.edu/~milton/reading_room/on_shakespeare/notes.shtml
http://www.portablepoetry.com/poems/john_milton/on_shakespeare.htm
http://www.underthesun.cc/Classics/Milton/PoemsOfJohnMilton/PoemsOfJohnMilton36.html
http://www.web-books.com/Classics/Poetry/Anthology/Milton/OnShakes.htm
http://www.repeatafterus.com/title.php?i=8692

Maybe they all won't link.  Search with:  "on shakespeare" milton

As you probalby know, Shakespeare died in 1616, 14 years before
Milton's poem, and is buried in a church under a flat tombstone. 
Thus, Milton's reference to a a "star-ypointing pyramid" does not
refer to that.

At the bottom of the first site (dartmouth) you can read that it may
refer to a poem by WS.

"Star-y-pointing" does not seem to be shown in these sites, so I (no
expert) would not give any significance to it, nor to "star-ypointing"
The great poets lived pre-Fowler and could spell any way they wanted to. :-)

The word "ypointing" is obsolete English (it was archaic even in
Milton's time). "Star-ypointing pyramid" has essentially the same
meaning as "star-pointing pyramid": a pyramid that points to the
stars. You'll find similar usages in Chaucer. Some manuscripts of the
poem have "star-ypointed pyramid."

"Prefix
 y-

(obsolete) Used to form past participles. 
 yclept, ycleped"

http://www.officialencyclopedia.com/?Q=y&f=on&t=2

"Verb Prefix: y- indicates past participles, but is not required
except for rhythm (yknowe = 'known'; yclept = 'called')"

http://www.msu.edu/course/eng/410/snapshot.afs/tavrmina/gram.htm