It surely depends on the size of your community, and the pool from which the high school draws. In our medium-size town, when choosing which rec-ball league, no-one thought of Cal Ripken vs. Little League; instead it was "the one that took all players and was really nice to everyone," vs. "the one where parents yelled at kids and each other"! Needless to say, the second was the one that was viewed as "tougher," the reality was that kids from both leagues eventually played in high school.
However, all kids who eventually played varsity in high school stopped playing rec after 6th grade at the latest, and moved to a travel team. The argument for playing "travel" was that it would get you ready for high school (no-one was thinking college at that age), and in fact I don't think that anyone who stayed in the rec league played high school, certainly not high school varsity. The players on travel teams just played more games, against better pitching, and had better coaching and practices. Plus, travel players wanted to work at baseball, outside of the team - we only went to a travel team because we knew our son wanted to work to get better. There was a hierarchy of dad-run travel teams, some with better coaching and better players than others, and then some people went to out-of-town travel organizations. However, not everyone on those travel teams played in high school; some developed other interests, some weren't good enough. We are just one town, I imagine that in a larger city, it's much more difficult to figure things out.
I agree, making it fun is the most important thing. When a kid is a "good" player in his league or on his team, whatever kind of league it is, it's going to be fun, and he will want to work to get better. If he's perceived as one of the worst players, that's less likely to happen. In years of travel ball, we saw lots of decent players sit the bench and then drop out.