After reading this thread I felt compelled to join the forum just to weigh in and respond to the passion in Littlelefty's arguments. My perspective is that of a dad who's been involved in YMCA-ball, a vibrant regional Little League, PONY Baseball starting at the Mustang level, and now looking for at select teams playing Koufax ball. Each has a value to offer baseball kids and their families and as time passes, each offers benefits and drawbacks.
But before I offer my two cents on this always interesting discussion, how about a few new facts that haven't been mentioned. The pitching distances and gradations Littlelefty mentions are correct for PONY but only partly correct for LL. LLInternational generally calls for 46' mounds at the majors level, which for most LL's consist of teams with 11 and 12 year old players. LLInternational also allows local LL's to create their own charters with different mound distances for gradations below 46' for Minors AAA and AA (single A is coach pitch and not relevant to the discussion).
Typically only a few of the most talented 10 year olds will ever make LL Majors before league age-11, so most will be pitching at distances that are the same as or shorter than PONY distances. If Littlelefty's son is gifted enough, or the LL in which he participates is thin enough, that he's able to make a Majors team and pitch, then he's pitching from 46' and that's great for him. But that doesn't make him the rule; it makes him the exception to the rule as most of his cohorts in his and other LLs are still in AA and seeing pitches from between 40 and 44 feet. And as the exception to the rule, it's disingenuous of Littlelefty to suggest that PONY's graduated approach has all kids his age pitching from shorter distances than their same-aged counterparts in LL. It just isn't true.
Aside from pitching distances, PONY's open bases adds an element of challenge for both players and coaches because pitchers and catchers (and shortstops for that matter) are tested in the running game. And there is no rule in sports that is more subtle than the balk rule. Kids with good "gamer" approach to the sport take open bases as an additional challenge; others flail and when balls get tossed around the yard, the games can dengenerate. Weak catchers are exposed fast, especially at Bronco with 70 foot basepaths. On the other hand, All-Stars and summer PONY tournament play can really start to look like authentic (ie non-kiddy) baseball when you get catchers with arms, pitchers with good moves, and baserunners with guts and wheels.
However, the thing that really separates PONY (and Ripken and Select, etc) from LL at the Bronco/Majors level (again 11-12 for all PONY and most LL) is the size of the diamond. Throws from the hole on the left side of the diamond with 70 foot basepaths are significantly longer than those on a 65 foot diamond. The field feels significantly larger. Middle IF has to cover far more ground playing D, and so strategic elements of the game like moving the IF from pitch-to-pitch, double play depth, corners in, etc. come into play more evidently than in comparable quality LL ball.
All that said, I don't think that any of this stuff has anything to do with player development over the long haul. Kids that are going to be HS ballplayers are not held back by staying in LL versus PONY, nor are the PONY kids advantaged. However the graduated approach does lead to gradual self-selection of viable players at each level, with the kids who can't keep up leaving the game or switching to LL (the latter of which is a good result because it fosters continued interest in baseball).