.... I certainly see the logic from the standpoint of learning more easier pieces quickly vs fewer hard pieces within a certain period. What I would have a hard time explaining to my nephew is how the application of knowledge from those easy pieces would speed the learning of a tougher work.
It is a very difficult task to explain EXACTLY in words how learning easier pieces makes difficult pieces easier. But as Shingo highlighted in the thread, its a reap what you sow concept. Can you really cultivate the most difficult orchid when you haven't even suceeded in growing weeds and keeping them alive? You can spend many many years trying to improve your mistakes of a more difficult piece and you will make progress, but what you produce always will be somewhat substandard and you will feel unsatisfied with the lack of complete control over over what you play and most importantly the large effort it takes you to achieve control.
I don't think we should squash the dreams of piano students who are starting out. I think it is good to have difficult pieces you want to learn as a goal. Many of my younger students who insist to study a difficult piece are forced to learn a few easier pieces which I choose and know will compliment the harder piece they want to learn. The method of my choice of easier pieces is difficult to explain but I look at what techinque(s) the student is lacking, notice which patterns in the hard piece they learn that I infer (from past experience with their difficulties with other pieces) will give them problems.
I don't really like to think that a piece can be completely learnt by studying other pieces. It is not as simple as; go to piece A B and C and you definately will be able to play this hard piece. The exact way in which we learn pieces however does have a constant common process, and many pieces have similar ideas (chords, scales, progression, coordination of the hands etc etc) as others. How do we memorise, how do we play a group of notes without having to think of the individual notes etc. This thought process must be repeated as many times as possible with as many peices as possible. The starting pianists should not confuse their hands with overly difficult technique if they have not good grasp with the way in which they actually memorise/excecute their music! There will be a challenge to produce normal movments at the keyboard with efficient techinque when you start out, let alone work out finer techinque you might find in a Chopin or Liszt Etude for eg.
Once you have a good grasp of how your brain learns music and you actively can improve your efficiency in this area, then you can start investing time learning "more difficult" technical procedure at the keyboard. You will have a method to tackle your difficulties and this method was worked out by yourself through tackling the difficulties you faced in easier pieces. It doesn't matter so much exactly what techinques you expose yourself to early on, so long it is within your hands control for now. What is important is that you start understanding the process of learning music. This process most teacher leave their students in the dark over, but this is a completely different discussion.
If you are stuck looking at music on a note by note level, you are simply wasting your time. Many students who play pieces too difficult for themselves get find themselves getting overly interested on individual notes, or very small groups of notes, instead of being able to understand an entire phrase of music and see it as a whole immediately. As you learn more and more music, new music you begin to read becomes almost immediately appreciated and you can often guess what needs to be done at your hands without actually putting yoru hands on the keyboard. You will find that when you pick up music that seems hard, it is not hard at all, it simply asks that little bit more than what you are used to, but you are seeing its difficulty in terms of the easier music you have studied and comparing it to the easier procedures you have played many times. So although what you need to learn might seem completely different, it can be solved by considering it in terms of what you have done before. You see how confusing this can be in words

It is important to expalin in your own words what the process you go through when you learn your music. When I ask students this question most of the answers tend towards constant mindless repetition. How each teacher explains to a students how to go through three types of memory (Conscious, Muscle and Sound) with a piece is always different depending on the teacher, and some teachers don't even bother teachning their students to sense how their brain memorises the music.
When I start teaching a pure beginner (someone who never has played the piano) I immediately highlight the fact that there is shape to the keyboard. The pattern in which the black and white notes make can create all sorts of shapes. Like C Eb G could be seen as a triangle, or D FG could be imagined as D with a squashed part to it. I draw these shapes all over their music. I get them to immediately observe these shapes and patterns and learn how to see new patterns etc. I personally teach piano in a very visual way, my words to students never correct directly but rather highlight a pattern or logic which the student can think about and then say, oh yes now I know how to play this group of notes. I wil say funny things like "black outsides white middle triangle with the squashy, no the squash a little closer." instead of saying, 5th on this note, 4th here, etc which I think is useless unless there is only very minor mistakes in the phrase. A teacher must know what the student is thinking so you can make chances to their conscious memory of the music. Too many teachers rely on muscular memory through constant drilling of a phrase of music until its done right without focusing on the conscious memory as a catalyst to the student finding their muscular memory to the phrase.
So you must see learning music very visually if you want to increase the rate in which you learn music and improve your ability to tackle "difficult" pieces. This can only be trained by practice and the best way is to do easier pieces so that you can repeat again and again the process of learning. This is the only place in music where I think you should mindless repeat, that is to constantly learn easy music, music that your hands can manage without great difficulty.
I would have to lie to you if I said when I was young I studied pieces which where easy for me and never did harder stuff. It was quite the opposite for me and I definately know what bad comes from it! It took me many years to remove a lot of wrong immature piano ideas which was hard because I defended how I played with my life, it was almost like killing my children! But it did teach a great importance of learning more difficult pieces. While I was constantly playing more difficult pieces, it was like I was swinging 3 baseball bats at the same time. When I had to play pieces for my musical exams it felt like I was swinging with 1 bat, very easy. But getting used to playing pieces too difficult for yourself definately slows down your progress, you simply cannot learn it with the efficiency of application of musical knowledge (nor can compare it with anything you have learnt before) because you are first learning about particular movements in this hard piece!