In JO, body type shouldn't matter, although I think the skills can be tougher on bigger bodies--more weight (and power!) can throw an athlete up higher, but then she lands with greater force. Harder on the joints. In 5 years as the parent of competative gymnasts, I've only seen two "big" girls at our gym go on to optionals--one was my dd1's best friend. The gym itself always encouraged them to continue.
JO gyms that would select little girls based on some percieved body type would be very foolish indeed. Dd1 had a great gymnast body. Her adult height is under 5'. but when puberty hit, wider hips and breasts meant she never had the straight up and down look. Again, though, the gym certainly didn't try to weed her out or slow her down because she didn't have the gymnast "look."
I think, too, gyms that have Olympic dreams may differ than your run of the mill JO gyms. Even before Chow got SJ to international elite, we heard about his team selections. Chow's an excellent coach and has a reputation as a very nice person, but his goal was to get somebody to the Olympics. His teams have always been very, very small. Families of girls who weren't invited to his team track and went to other gyms have told us that he does, in fact, look at body type and height of the parents. I am not being critical as the gym is pretty up-front about what it's looking for, and since Chow selects young girls to start his team program, there's plenty of time to find a another gym (there are two other really strong ones in the area) and still get to compete.
So, mom2ab, if you're at the kind of gym that thinks it wants to train Olympians, you might very well see some advantages to looking "like a gymnast." For most of us, though, I hope the goal is encouraging and supporting participation for kids regardless of size/shape.