The opponents ratings are not factored in. Sort of. IQ is, type of O and D is. But individual opponents ratings are not. Some coaches use the "o" distro method early in the season to get a feel for who are the best offensive players on their team.

edit: I have no experience or facts. Just old forum posts and really really old developer comments.

It is strictly based on your offense and does not consider the opponent. In spite of that, some coaches have been successful with that approach although I don't know if any have done it since the recent engine makeover. My personal opinion is that if I am paying money to play a game that lets me be a coach, I don't want to give up any part of it that I can control myself.

Why is IQ   and type of O and D included and not opponents ratings...if that is the case it seems like they would have had to programm it not to factor it in since the engine is running the game and determines all outcomes?

Example in theory a motion offense is designed to take what is there on each position with the movement of the offense and reaction of the defense, so what you are telling me is that if you set a distribution for a player at 25 and while running a motion he is only open according to the engine about 15% of the time the engine will ignore the motion outcome and use the distibution settings to take a more difficult shot?

Even in a normal (HD) game if you have 1 player set to take 100% of the shots and never leave the floor he will not take 100% of the shots. Tip-ins and "stuff" happen. 

If you have a C and PG each set to take 50% of the shots they will end up with less than a 100% of shots taken because of tip-ins and "stuff". Note, the C will probably score a little bit more because of offensive rebounds.

Now, if the defense the C and PG is facing is playing a 2-3 zone and is sagging with a -5 and you are running motion, then yeah, the PG will take the majority of shots. But not all. The C will be 2nd and then the rest of the team getting scraps.

Very few things in HD are either 100% this way or 0% that way. 
Disclaimer: I probably have more losses than any other coach, so take my info with a grain of salt.

jenningss, i think you are sort of mixing up a few things. you are mostly correct just muddling the line between what the engine does vs specifically for 0 distro. or maybe i am muddling the line. anyway, here is what i think, which could be wrong:

for 0 distro, the engine is basically going to pick your distro for you. this is based entirely on your own team, and not at all on the opponent. their offense or defense or +/- is not relevant. 

in the actual game simulation, the engine does compensate for a number of factors. i personally believe this includes many things - and is based off of how well defended your player should be, which would be a combination of the opponent's individual ratings, and the defense they run, and +/- settings. but, the engine does this regardless of if you set distro yourself or go with all 0s.

so, to the OP, i think that answers most of your questions. you also asked if many people use it. i think a fair number of people use it, but i think the vast majority of the top coaches set it themselves. i would highly recommend you set it yourself. many coaches who use 0 do better off than if they set distro themselves, but that is because they don't know how to do it, not because 0 distro is better. the only way to learn is to do it yourself. so whether 0 distro seems to work as well or better or whatever, just set it yourself.

my personal experience with 0 distro is that it usually does a terrible job. its really hit or miss. with one team, it could work surprisingly well (generally those with more balanced teams have a better shot). then with another, it could be mind bogglingly bad. i haven't tried it in the newest engine, but i tried it a bunch of other times (particularly when i was too lazy to set my team up early, i would put them at all 0s). one time it actually worked well enough that i used it in the NT. i also set the distro some myself, i was back and forth all season. in the end, i decided all 0s was working better with uptempo and setting it myself was working better with normal tempo. it took me until the final 4 to make my decision, because really neither was working as well as i knew the team could be doing. finally i went with uptempo/all 0s and we won the next two games by like 26 and 40, but the team was really good so probably we would have won either way. it was a long long time ago, early in my HD career, and i wasn't as good at setting distro as i was now. i firmly believe it was only because i couldn't find the right mix that 0s worked better, i don't think you could ever have a better setup with all 0s than the optimal setup doing it yourself. of the many times i tried 0 distro, that is the only time it worked, and it was also a highly unusual team in terms of the offensive players, compared to what i had usually (which made it hard for me to find the right distro myself). since then, its never worked even decently, its always been god awful, so i haven't toyed with it recently. i would guess in this new engine, which has more disparity in offensive talent on a team, 0 distro would be less effective. however, making big men more effective would make 0 distro more effective i believe, as in the old engine, guards were over powered on offense and the 0 distro setup didn't seem to take that into account.

I took my St Scholastica team in Wooden to the elite 8 using 0 distro all year long. I wanted to try it out and it worked well. Granted the team had 0 Freshmen, 3 sophmores, 6 Jrs and 3 Srs which probably helped.

Do you guys agree that the engine then does not pre determine the distro but rather does it during the game and if that is the case wouldnt it be more efficient?

I dont know how the engine does it, but I think setting all the guys at zero is rather clearly a nonoptimal approach.  If you do that and look at the FG efficiency of your players, you will see that some guys are shooting too much and some too little - what I mean by that is some guys are shooting a bunch at 40% FG% and others are not shooting much at 60% FG%

that said, when I get a new team I often will go zero distribution for say three games to see what that looks like and then develop my preferred distribution

In my experiments I found that the engine did a real good job so thats why i ask.

I use 0's for a few senarios- 

1. Trying to figure a new team out in early games
2. Trying to get someone to over-coach based on my previous distro
3. When my team is VERY balanced, and I want to keep from pushing the ball to one guy too much.

But, I rarely use it in big games, or with good teams.

If you want to get an idea of what using all 0's distribution looks like, just look at a SIM AI team.

I've had some real good success with all 0's for FB teams.  At least once or twice it worked incredibly well when I set my distro and had it flop incredibly badly and then the all 0's was like the magic potion.  I can't remember if I've even tried it with a non-FB offense.

I have never used it, but I now have a team with 10 fr. and soph. that is getting pummeled nightly, so I'll give it a shot and see if it reveals anything about my team to me.