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One more way of looking at this debate: while I pretty much agree that fewer prospects will lose playing using the "potential" setting, I have another outlook that just came to me.
Not saying I am right or wrong, just thought I would throw it out there.
As said above, the AI might not be starting borderline players if one were to be using the "current" setting...however I also wonder if the AI throws an overmatched player into the mix too early (because he has high potential ratings) could it negatively affect development?
Although NoOne also stated the promotion/demotion and who plays at each level, are mutually exclusive...so
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