I think it comes down to competition level and program size. If your local facility has 4 to 8 teams per age group and the rink balances teams well, there is a lot of benefit to in house only, with evenly balanced competition. I believe that it does kids no good in their development to be playing on a team that always loses by a lot of goals or always wins by a lot. Kids need to experience all facets of the team game to develop. If your program is small and struggles to put more than two teams on the ice, having the kids play other towns is more beneficial in my opinion. It should also be noted that having a team go to another rink to play another house program is not travel, provided the other rink also balances their teams appropriately.
On an individual player level though, the decision as to whether or not a player should play travel really depends on the challenge they are experiencing at the house level. I have coached travel and house, and I always tell the parents of players that I coach, that there is no need for true A, AA, AAA etc. play as long as your player is being challenged at the level they are at. If the player is absolutely dominating every game at house level, they should try travel as they need challenging competition to push them to develop further. If they are not dominating they should stay where they are.
Overall I tend to agree with USA hockey, I really don't think true A,AA,AAA travel hockey is needed at squirt and below. I think that we could go a step further and save travel until U14. In a lot of places, travel hockey is really just a way to milk parents for thousands of dollars each year and doesn't provide a lot of return on investment, development wise. Ice time provides the largest benefit to development, and if house programs provided the same amount of ice that travel programs provide there would be similar development in house players without the expense of travel.