yeah, there is the happy medium.
red wings are above average on drafting, i think and probably little better than that on developing. but their track record isn't that great since lockout. some players can develop bad habits if they play low comp too long. i guess that is what happened with kindl and smith but we never know. nyquist didn't break out until he got consistent time against NHLers.
Kindl is garbage. He's perpetually lacking in confidence, makes thoroughly boneheaded decisions in the defensive zone, and is a coward where the physical side of the game is concerned; he doesn't use his size, and is never willing to take a hit to make a play. Smith has potential. He has 1.5 seasons under his belt, is steadily improving, and played fairly well on the top pairing for a time last season. Kindl is yet to play consistently well on the 3rd pairing. His days are numbered.
As for your talk of having development stunted by playing too long against lesser competition---no. Kindl struggled in the AHL. He was decent, but only decent, on offense; he never put up anywhere near Almquist's numbers, for example, and his performance was not particularly encouraging for a guy who was drafted on his offensive merit. His body of work on defense was generally poor. He was a brutal -34 in his first season, and he was a minus player for all three of his AHL campaigns. He got better over his time in the AHL, but not sufficiently so to justify his selection in the 1st round; indeed, he was virtually alone amongst his peers in not being called up for even a single NHL game during his time in the minors, even during the brutal spell of injuries to the defense in 2008. By the time his waiver exemption ran out, he was not yet fit for duty in the NHL. Worst of all, he has made practically no progress since coming into the league.
Smith played two seasons in the AHL. Though he did not, as was hoped, light up the league, he played very well, and was selected to the all-star game in his rookie season. Babcock judged him ready for the NHL in the 2011-2012 season and wanted him on the roster, but Holland (surprise, surprise!) elected to keep him in the minors. He spent 14 games in the NHL that season as an injury call-up, and did very well. During his rookie season, he made plenty of amateur mistakes, but even then he was clearly an NHL defenseman, and he has steadily improved since.
In other words, I don't think your theory holds any water. Kindl simply isn't a very good player, and he appears to have reached a plateau. Smith is a good player, and he's continuing to improve.
As for Nyquist, he got quite a bit of time in the NHL before last season; he played a total of 58 games over the 2011-2012 and 2013 seasons. He really hit his stride in the 2013 playoffs, and that was that. But he clearly wasn't ready in 2012.