This is where it would be important to understand the league rules and bi-laws, as opposed to the overarching rule set. And, at the same time, it would be up to the coach to understand that this is a specific league or tourney rule.
There are settings (it's more common in slow pitch) where there is a line in the outfield, and outfielders may not pass it at anytime (and others where they may not cross it until the ball has been hit).
I can definitely see this in an 8U machine pitch league where you would want to prevent a team from putting it's entire defense in the infield.
EDITORIAL: at this level there should be no outfielders. And I've seen this work. You draw a line at the outfield grass boundary, or some closely equivalent distance. If 7 year old Susie or Achmad hits the ball past that line (by ground or air) they get a homerun. Advantages include, but are not limited to:
smaller rosters and lineups ensure more at bats (the most important skill to learn at this level)
smaller rosters give you ability to have more teams
coaches who conduct practices can focus on infield skills - save outfield for later years
players don't immediately learn to resent outfield as "boring", as the ball just doesn't go out there nearly as often at this age
kids get to have fun and do a home run trot once in a while
I believe baseball should be taught and administered in levels. Kids should not start at, but systematically graduate to, things like outfield play, infield fly, dropped third strike, stealing, bunting, etc.
EDITORIAL OFF