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I tend to keep "trade between leagues" off because it doesn't really work well, because like you said, MLB teams (or whatever your top league is) will make dumb trades with lower league and foreign leagues. This is why I want a "cash only" option so that teams can buy players, which generally makes more sense. Since I usually play as the commissioner only in my universes, I sometimes intervene and make lower teams "sell" players to higher teams.
Of course, this only applies if you're doing a setup similar to real life as far as talent distribution, finances, etc. go. If you're doing a fantasy universe where all things are equal, then it's a nifty feature.
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