justbaseball, I think a coach CAN make a "right" decision at the time, only to find out the kid matured in the meantime and it turns out he was wrong in retrospect. There are plenty of stories of kids that were underachievers at one point only to mature into a completely different player as they get older.
In the OPs case, and in my case, I don't think that is the situation. One thing that happened in the OPs situation is that the coach told the player "You will never amount to anything - and I will make sure of that". That is just plain wrong. Another thing in this situation is that the coach WANTED him to play on the LL All-star team. So, he obviously thought the player was good. When the coach didn't get his way, he went out of his way to try and blackball the player. This is wrong as well. I think this particular coach made the "wrong" decision in attempting to "get back at" the player for not doing what he wanted and not that he thought the kid wasn't good enough, he wanted to punish the player emotionally as well by telling him he would never be good enough. This guy is a jerk and should not be allowed to coach kids. This player's feelings seem pretty justified, he just needs to get past it in a mature manner.
In my case, the coach begged my son to try out for the team when we weren't sure we were going to. He then cut him only to have him play for him in the following season - like 4 months later - with my son proving his worth. Yes, it was about 4 years later with the HS varsity situation, but less than a half year later, my son proved again that he should have made the team based on merit. Not a lot had changed in those 4 months.
My situation is different than the OP in that the coach we were involved with was a nice guy. I think the decision he made was a bad one, and I think he agreed. With the OP, the guy is a jerk. Both situations could bring about some animosity and a feeling of wanting to hold a grudge. Both situations require someone being the bigger man and just going out and proving them wrong with action rather than words and animosity.
I'm proud of how my son dealt with this at a young age. We still talk and laugh about it from time to time. I hope the OP will be able to look back on his situation and laugh about it one day instead of feeling angry about it. Everyone faces obstacles in baseball and in life. It's a matter of how you overcome those obstacles and come out on the other side that counts.