I was curious if any of you experienced coaches go with 10 scholarships and 2 walk ons?   What would be the plus & minus of this strategy?

I have had 2 walk-ons many times but rarely by choice. The advantage is that you get the additional schollie cash the following season. The potential disadvantages are that you could be short handed if one of your starters or backups gets injured, fouls out, or is overly fatigued. Also, there is a minor hit to player improvement due to not having enough quality players during practice time but from my experience the impact is only a couple of points per season.

I don't know if you would consider me "experienced" (although my game rating says Pro, which did wonders for my ego), but I can point to some of the obvious pros/cons of this issue. IMHO, the main upside would be that coaches can focus larger amounts of money on specific recruit(s) for whatever reason. The obvious downside would be that your team is just one bad injury and a few foul calls (fouls being a guarantee these days) away from having to play with walk-ons and/or extremely tired players.

To mitigate the risk while utilizing the rewards of this strategy, when possible I try to recruit 2 or 3 specifically bench players that have either good versatility or good core rating (although typically deficient in other areas, or considered the dreaded "long term project"), but just as importantly they can be signed for very cheap. This way I can spend more on higher caliber players and avoid some of fears associated with injuries. Plus, low DUR doesn't become a major factor, gameplan flexibility is increased, and occasional leftover recruting money never hurts.   

When I had a low prestige team, but was pretty sure my prestige would be better the next time,  I deliberately took one or two walkons. I figured I'd get better players the next season

I do it all the time, but sometimes its just because I blew recruiting.  I did it on purpose with my VT team this last year and on accident with my N. Colorado team.  Weena's point of the practice penalty was stated in the FAQ I think, but I am not sure that is the case in the new engine, or at least I didn't notice it. 

I'd do it intentionally if stuck at the end of the recruiting period and there was no one available who could help your team. 

I have been leaning toward this strategy, I like the idea of playing 10 players instead of 12, plus it would give me more recruiting money to spend on better prospects.  My only concern was the drop in development of my players with 2 walk-ons participating in practice.  I was looking for some advice from someone who does this on a regular basis. 

I think with walk-ons you want to think about running slowdown as you have less guys and stamina is a much bigger factor now. Also, consider upping your team practice minutes in offense and defense -- walk-ons impact improvement rate of IQ.