The answer to the youth sports situation will depend on the individual...
Can young kids play multiple sports? Yes, and you should have them play as many sports as possible, from ages 5 through 10ish. At some point between 10 and 12 you will have to make a decision as a family and at least narrow things down to 1 to 2 sports. The reason being is that recreation leagues don't have enough youth staying engaged after that point to form teams. You will have to shift to club sports and start to specialize. This is the reality. The good ole days we grew up in are long gone.
Why should they specialize? This is where it depends on the individual youth and what they want to do. Of course, this is a family discussion too, because it will be a commitment for everybody. If the athlete wants to continue to advance their capabilities they should specialize... to a certain extent (I'll circle back to this). Soccer, hockey, baseball, and softball are spring and fall seasons, with training nearly year-round. Basketball has winter and summer seasons, with training nearly year-round. Football is a fall season, which conflicts with baseball and soccer. Off-season training for football will conflict with soccer, baseball, and basketball seasons. Sprinkle in other options like lacrosse and field hockey, cross country, track and field, and it gets crazy busy.
But I've always believed it all depends on the individual. This is where things get complicated too, because "parent goggles" are a real thing. I can't tell you how many conversations I've had with parents over the years who talk up their little athlete like they're the next all-star, only to watch them trip over themselves trying to run down the field. Yikes. Eventually, those situations work themselves out. Unfortunately, it comes at a price, mainly felt by the kid who has been talked up their entire life (by the parent), only to get cut from the team or sit the bench once they're at the high school or high-level club. Then you have a situation where the youth becomes disenchanted with the sport and quits. I hate to see that because honestly, sports are about life lessons, not scholarships.
This is where I circle back to specializing. Both our kids chose to specialize in soccer when it came time to make those decisions. They played a variety of sports growing up, and throughout middle school, but since each of them hit 14 it has been all soccer. It's what they want to do, so we support that decision. Now it is a matter of managing burn-out by keeping other activities in front of them (hunting, fishing, golf, etc.). There are definitely times when breaks are needed, you can see it in their play and overall attitude. Sometimes you have to implement a break for them, other times the season ends at just the right time, and before you know it they're talking about how much they miss playing.
Throughout it all, you just have to keep perspective as a parent. Sports are not about scholarships. If that happens, great. But don't count on it. Play sports and play them as long as possible. The lessons they teach are invaluable throughout life, from teamwork and leadership, to learning about commitment and follow through. Discipline, hard work, giving your best effort, learning from your losses, preparing for the next game, the list goes on and on and on...