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I do a lot of historicals in the 50s-60s period. My approach is this:
1. I create only two minor league levels: AAA and AA. The historical rookies fit well into these two levels when they first arrive on the seen. More than this is unnecessarily complicated. Less is uninteresting. I don't use a draft because there wasn't any such thing then.
2. I create fictional players based on AA and A player creation parameters (couple of ways to do this). In addition I downgrade speed and fielding player creation modifiers, because otherwise even these low-level fictional players tend to outshine the real players. In the future I may downgrade pitching as well. As a result, these players can fill in for the real ones, but tend not to advance beyond backup status (though it's hard to avoid getting a few that do).
3. I do not block fictionals from the ML, for two reasons. One is that my purpose is to facilitate realistic injuries. If you don't allow fictionals into the ML, you don't have robust enough organizations in that period to fill in for injuries, suspensions and the like (or you end up having real players playing out-of-position too much). The other reason is that the fictionals represent stand-ins for minor league players of the day who, by happenstance, never got a chance to play at the ML level, even though at least some of them would likely have performed as well as some of the players who did get promoted. To put it another way, some of the players who show up from the Lahman DB might as well have been fictional or anonymous for all that their ML careers amounted to. Regarding them as somehow more legitimate than the fictionals is hard to justify.
Hope that helps.
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