I've coached my daughters rec league the last three years (ages 9-11). And yes, while the league has been hollowed out by people leaving for travel (we can really only field 5 teams), there's definitely still some talent there. And I find the reduced pressure really helps to not only work on general concepts to make them better players, but also to let them just have fun.
One of the nicest things in our league is that since its non-competitive, it basically allows you to pick your own teams. While this could back fire with significant talent disparities that make games essentially pointless, we got lucky and most teams are pretty evenly matched. But the best part of this is that we've basically had the same team for three years in a row. This allows them to develop a chemistry with each other, and allows us to build on concepts year over year.
Which is important, because to me, after doing this for the last several years, the biggest impediment to these kids getting better is time. We get one hour long practice a week, and one game, and seasons are basically 8 weeks in the summer, and 8 weeks in the fall. It's just not enough time to teach these kids all we want. If we even had one extra hour long practice a week, or hell, even making that one practice 1.5 hours, it would make a big difference. Yeah, travel teams probably have more talent, but they are better because they play a lot more.