I know there is value in having inactive players in the minor leagues to cover injuries and tired pitchers but is there any value/use to completely filling the rosters at each level (up to 35-38 for each level)? Specifically for the end of the year when I am promoting players for the next season is it worth holding onto low talent players as inactive or should I just release the worst players and only keep 5 or so extra players per level?

You're going to lose players every season to retirement and also the guys who currently have 5 seasons under their belt will become free agents if they aren't on the 40.

For these reasons I like to stay pretty full across all levels. You don't have to max every level but it doesn't hurt either.