My $.02...
my son plays on an 11 y/o travel team. He has been with them since the team formed (just last year). He was recruited solely as a pitcher. His batting is not near the other kids level, and he is one of the slowest runners on the team. His fielding skills are on par with all the others, but his lack of speed precludes him from competing for another position.
For the first 6 months he was on the team, he was their 'ace'. They won nearly every game he pitched, and lost nearly every game he didn't. We took a break for the little league season, and during that time, the team has recruited some (much needed) pitching. He was immediately bumped down to the #3 pitcher. In that time, some of the other kids have improved their pitching, so instead of being a 'solid #3', he is now 'just another pitcher'. Since his other skills are not as polished as the others, he now feels almost shunned form the team. In the last 2 tournaments, we have played a total of 8 games. He has had 3 at bats total (2 walks, and an RBI single down the 3rd base line). He has pitched 3 total innings, and 1 of those was a complete farce. We were down by 7 runs in the bottom of the fourth, and about to get mercied. They put him in the game with NO warm-up (except for the 8 warm-up pitches on the mound), and expected him to get 3 outs from the top of their lineup).
OK, enough of the tale of "woe is me'. My point is, decide early on if this is going to be a team of "the best kids I can find", or "let's see how far I can take this core group of boys". We have been told many times that none of the 'original' team will ever be released due to performance. Only if the quit on their own, or quit trying. Well, they are holding true to their word, they aren't releasing him 'officially', but they seem to be trying to make him want to quit. Baseball is all my son wants to do. He doesn't want to play any other sport (he has tried them, but doesn't like them). He watches baseball on TV when he can't go outside, when he is outside, it is always something to do with baseball, and he always sleeps with a baseball in his hand.
My wife and I are fed up with the team, but we decided that this is HIS decision. As long as he is having fun, he will play on the team. If he wants off, or he isn't enjoying it, we will find him somewhere else to go.
Tell the players and parents exactly what your philosophy is, don't beat around the bush...it is much worse that way. Just remember, these kids are only 12 years old (or 11).
Also, keep in mind that puberty is a crazy thing...you never know how strong/fast/dedicated they will be with hormones. My son hasn't hit it yet, but he is already 5'4".