Yup, that's all legal. He can also pull them out of combat with a Lord using a Veil, but they don't get the second try at a WBB roll that way.
You didn't mention destroyers or any units other than the lord, the 'lith, and two warrior squads, so we're looking at two very large warrior squads. I'm willing to bet he deployed the lord in front with a warrior squad within 6" on either side with the 'lith in the back so that once you assault he can port the warriors behind the 'lith to shoot you full of holes. I know that's what I'd do.
Most 'cron players consider it unsporting to field a 'lith in a game this size, for reasons exactly like this. I'd start by calling him on it, but the army can be beaten if you're willing to be as vicious as he is.
Given that almost all his firepower is tied up in his two two warriors units, I'd try to keep them from firing by using Horrorfexes from raiders and ravagers while you send in the troops. Multiple pinning tests at -2 Ld (possibly more depending on how tight his warriors are clumped) on each warrior squad should reduce the incoming fire significantly, and if you manage to assault as well he has the choice of particle whipping your vehicles or saving his warriors. Using night shields would also reduce the odds of being shot by his Lord's staff of light and the particle whip (assuming he isn't too busy pulling warriors out of CC to be particle whipping in the first place).
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If you want to be really mean, here's something very tricky but terrifying against Necrons in particular.
One of the little known parts of the WBB rule is that any models swept when falling back cannot take a WBB roll under any circumstance. So you want to sweep his warrior squads, which is a difficult thing to do with their leadership. A wych cult has trouble with this, but a kabal can use grots to force those fallbacks. Given that he doesn't have destroyers, his army also has a whopping one gun that can hurt a Grot unit, that being the particle whip he won't use when you're in CC with his warriors.
Take two raider squads w. horrorfexes, a ravager with 2 dissies and a horrorfex, and a dracon + grots on a raider w. horrorfex. You can squeeze that in for under 750 points, so you've got a lot more room to play with.
From a tactical standpoint, you want the grots + dracon to hit as few models as possible in one warrior squad, and throw everything you've got at the other warrior squad. You should be used to this if you've ever run solo dracites or archites, you want to make sure you take out everything in the kill area on the charge so they don't have anything left to hit back. The tricky part is making sure that you're 5-6" from the warrior squad before you charge so the grots don't get too dug in.
If you manage to pull it off, you'll win the assault by default, and as per the grots' special rules he'll immediately fallback. You'll have a 66% change of sweeping them, and that's almost half his army gone and unable to WBB in one relatively small assault. If you fail, then you just run them down and do it again next turn. You won't have to worry about much rapid fire hitting your dracon because of the Grots soaking most of it up, and your shadowfield should be able to take the rare shot that makes it.
Even better, if you hit the inside corner of a warrior squad, you might be able to consolidate into the Lord and force your opponent to choose between saving the Lord or saving his other warrior squad, which has the entire rest of your army beating on it it. If you aren't able to reach the Lord, your opponent now has the fun choice between pulling the other warrior squad out of CC with your raider squads, or trying to particle whip your grots before they reach his second warrior squad and sweep them as well.
When it works, you'll decimate him. When it doesn't, he'll massacre you, which isn't really unusual. We are DE after all.