[Pdubya64]

To your first question, Yes- to a certain degree. At some point I believe having too many players at a level is counterproductive. However, doing something about it means taking on a lot of initial and follow-up work yourself in order to separate the wheat from the chaff on a team.

To answer your second question, Yes. This is one reason you may want to go through the roster, find the best prospects and figure out what position you want to develop them at and use the position lock so the coaches have to start them there.

Lots of OOTP players leave the lower minors alone and let the game manage it. Up to you how invested you want to be as GM or GM/Mgr.
I would hang around to get some more opinions on this as we have a lot of "old heads" here who have gone through this situation countless times.