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The way the AI seems to handle it is if they have a losing record and are out of the playoff race by the midpoint of the season, they release their priciest players and sign C and D rated replacements to increase their development coffers for next season. If you really want to cheese the system you can do something like that and sim a season or two in order to build up 20 or 30 million in development funds, or you can just do that by default if you don't have any players you really care about developing.
Just keep in mind player development is a long game and it may take two or three seasons to really see results. Also keep in mind that you can get significant boosts and penalties through random events that far outweigh what you can buy through development (I had a pitcher gain almost 50 junk in a 16 game season once mostly through random development). Young players tend to benefit from random events and older players (35+) tend to see more decline, although not always.
The first season is usually the only one where there isn't anyone worth signing to begin it, by the second season onwards you usually have a ton of role or bench players left over from offseason negotiations or even starter quality players who slipped through (although certain positions always seem to be at a premium). I don't think it's necessarily a bad thing since it forces you to really get a good look at the team you picked before making any moves.
Hope all this helped. It's a really solid franchise mode once you get used to the system although it still needs some work to be great.
When you see a hitter with really good contact and power but the RBI dud trait for example. It impacts the decision to sign them and how you want to utilize them (maybe they'll be better at leadoff than cleanup). Unfortunately the game only allows you to futz with the lineup when you're playing, this would be a deeper system if they allowed us to manage sim and watch lineups too.
It also impacts grade and therefore signing money, so a player with 55 speed and stealer is probably going to end up overpriced. On the other hand you may be able to sign the RBI dud above on the cheap.
My guess is the mod doesn't use traits because it's a gamey system and maybe they don't want to deal with the controversy of certain guys having certain traits.