Interesting one this and first I'd heard about it. Our Academy will be playing in what was the Johnstones Paint Trophy this season and will play a game at the Etihad in it. Unfortunately, I didn't make our only other appearance in the competition at Maine Road against Mansfield in 98/99.
http://www.dailystar.co.uk/sport/football/528082/Premier-League-League-On-Two-EFL-Trophy-academy-teams-join-competition
Can't see why the Star would make this one up! Even though it does seem a bit odd.
Yer, I remember seeing something a few months back. I think they were exploring wether they could enter the youth teams into the leagues as well, similar to spanish teams.
Stop Press: We've turned it down due to other commitments
http://www.bbc.co.uk/sport/football/36763761