FWIW, we faced the decision of where to go to HS: large public with good baseball, exposure, many social opportunities but limited ability to sculpt a good academic path or a small private with awful baseball and insular social life, but small advanced classes and an administration which would develop academic curriculum on essentially an individual basis. S is a LHP and he chose (much to our relief) the private school option.
I believe the lesser baseball competition did effect his development - but in the grand scheme of an entire life, didn't deflect the path of his baseball career noticeably. He ended up at a D1 high academic school, played for four years, graduated with a legit major, had one successful season (his last), played in Northwoods and the Cape, spent one summer in NYC working for MLB, accepted an offer for a permanent job from a plethora of offers in his chosen area, and is still playing (the prospective employer said to call, when playing was over).
IMO, education drives the bus - in HS and beyond. As others have noted, there are plenty of opportunities during the HS years to face higher end competition. I'd say go the HS option which open up better college options (academically and ultimately jobs).