I've been involved in youth sports for a long time. Here are the issues:

1) Youth sports are more about sportsmanship and competition as individual achievement. It can be conceived as being unsportsmanlike to use a dominating pitcher at lower age levels. Usually, this perception is from "new" or "inexperienced" parents, which at this age level, is almost everybody.
2) At this age, there are always kids that develop quicker than others.
3) There are rules against moving a player up, and exceptions are very hard to get.

Now, my own perspective:

It is not doing this athlete any good playing against kids his own age, and he should be moved up. One of the best 10 year pitchers I ever had doesn't pitch any more. They get used to being dominant, but guess what - everyone else grows up too, eventually. When the other player catches up, the crushing feeling of failure will sometimes drive a kid to quit pitching. I have seen this many times, and is what happened to that pitcher I referenced above.

Moving a kid up an age group provides continual challenge, and will to succeed, which leads to increased drive and work habits. Also, a HUGE part of pitching, or any sport, is learning to deal with failure. With a lack of any type of failure early, it is impossible to deal with later (like 12 or 13), and the player stops pitching.

The league shoudl make an exception, and move him up. However, Little League is an omnipotent power, who is inflexible, and fails to recognize developmental differences in young athletes. Until they change, this sor tof thing will happen.

My own daughter almost gave up pitching a few years ago, because no one and her team wanted to catch for her, and other teams didn't want to hit against her. She almsot gave it up, because it wasn't challenging. I took her out of Little League, and into club ball, where ability matters more than age. She was renewed by the challenge (older kids hit the snot out of it, and she had to wrk even harder to not get clobbered).

They should let him play up and be done with it.