I feel like there's a bit of a false dichotomy being presented here. In most cases, the two should go hand-in-hand.
If giving a prospect a certain amount of ice-time legitimately hurts the team's chances long term moving forward, then I wouldn't expect being played in that manner to help their development rather than harm it anyways. The inverse of that is true as well.
That doesn't hold up 100% of the time, but I don't think there's as much of a conflict as what's been implied, personally. Problems only really arise when coaches mis-identify what would help and harm their club or are simply stuck in their old ways. For example, when Hutton was being benched because veterans were trusted more, the coach was actually hurting his own team's chances while also hurting Hutton's development.
If a minor league team is properly run, you would want it to concentrate on being competitive, be open to developing young players while also refusing to play favorites for the good of the club. That kind of environment should be ideal for development, IMO (even if a prospect is so poor that they would end up being justifiably benched in that environment), not one where you have to choose one at the expense of the other.