Stats, you make a good point. Varsity letters are much like participation trophies to some extent. I get frustrated when non sports get varsity letters but then all of my kids play sports. That is atopic for another day and usually becomes REALLY heated on both sides
I run a basketball program too. (sounds like a lot of us are duel sports 
). Both Rec and travel are within this league 1st-8th grade. 95% are 1st-6th. We have tryouts for our travel teams. Our rec program gives participation trophies thru 6th grade. Our feeling is for many of those kids a PT will mean a lot. The $1000 we spend as a league for the 500 $2 trophies are worth every penny (to me) for the 100-300 kids that it does really mean something. for our travel program- no trophies unless earned in a tournament or winning travel league. To me, it depends on levels of competition.
I like the way our HS does it when it comes to athletic letters. If you play your frosh year you are given you graduating year letters. So my 2017 received '17 at the end of his frosh year. You are only given them once, so he was given them after football season and did not get another set after basketball or baseball. They are given a soph patch after their soph. year. Again only give one and not for each sport. After they make a varsity team and complete the year they are then given their varsity letter. You don't receive your letter until you finish the season on the varsity team.
I do know the band kids get varsity letters but I don't think the club kids (ie debate team, etc) get them.