I think it lies somewhere in between.
If what you say is true, the coach is not doing the players any good by blowing smoke. Its good to pump kids up, but on the same token, you cant over sell them.
On the other side, no matter how much smoke the coach is blowing, is it really your sons place to sit on the bench and down play the teams play and accomplishments? When these kids start talking about their 11th place finish or whatever, I'm sure they are getting heated when the kid not playing tells them it means nothing. I'd be upset too. Nothing personal, I just think it would be best for him to keep the peace and just smile it away.
I agree and would have a problem if my kid was sitting on the bench and said something to that fact. I would be the first to have an issue with that. I'd like to think that my son has been taught to respect the game better than that, but hey, kids will be kids. My son is not on the fall travel ball squad. He was only responding those who boasted in his face at school, and if it was a top 20 finish it would be huge accomplishment for them and praise would be well deserved.