My experience is that at club level the answer is no to until the age of 15.
From the ages six to 11 I would definitely mix up the players. After that, as the players grow at very different rates (physically that is), then you might want to stream them.
However, A and B squads are not always a good idea because players are not really interested in competition between squads. They just want to play with their friends. You just need to look at the extensive research done by the NZRFU and more recent the RFU to see that. And other research from other sports also supports this idea.
Though it may seem frustrating at times when weaker players seem to hold back stronger players, they are ONLY YOUNG. It simply does not matter that players are not progressing their skills superfast. More important is keeping more players engaged in the game. Motivation to play is the key.
Only when you get to the ages of around 15 and onwards (and there is still some debate, but 15 is a good starting point), should real streaming come into play. Players are beginning to be mature enough to think about personal competition for places. Though we adults think that it might be younger, because it teaches them life lessons, again the evidence suggests they simply drop out of sport.
However, the Australian Rugby Union found they were losing players to swimming when they were in their teens.
Anecdotally, the team I ran from U6s through to U16 has seen five boys become strong players who, if you had seen them at 8 and 9, would have been B-teamers. We used strict rotation. I am not trying to create the next crop of internationals, just players who want to play rugby next week. Given that, one boy did represent Wales in the U18s Six Nations this month.
Again, anecdotally, I have seen “winning” teams have waiting lists. But, that hides the turnover of players on the margin. They leave and are replaced, but the player who leaves, leaves rugby for good. I refereed an U15 game in January, and speaking to the coaches of one team, they knew of three sides that had folded in their region.
In summary:
1. No streaming for 6-11 year olds
2. Mix up abilities for as long as possible
3. Players more interested in playing with their mates in long run
4. Players are not mature enough to “fight” for A team status until they are at least 15. Any earlier and you risk losing players from the sport as a whole
5. Young players are just that, young. Keep rugby enjoyable, and don’t drive them too hard. They will grow with the sport.