Another issue that comes from this is the shock when they get older and make a complete fool of themselves in an actual competative situation. I remember watching some talent contest and the entrant was an appalling singer and was told as much. Apparently his mum had told him his whole life that he was amazing. It was actually really hard to see his reaction. His mum certainly never did him any favours doing that.
I see it in gymnastics too. Girls who have trained and competed in the elite section where there are hardly any competitors and are used to always getting medals. Then they down size back to national level and discover they aren't as special as they thought and no longer get medals. There are also those who have natural talent and never work at it, then wonder why those that weren't naturally talented, but worked hard, are surpassing them.
It has so many effects across people's lives and I think is a major reason for some forms of depression as people are essentially encouraged not to do the work but, expect the outcomes of doing the work. It is a conflict in position and comes with disappointment, which would be fine but unfortunately, the same people haven't the skills to deal with the disappointment either.
Yes, precisely because they don't learn to cope as children when it's something that isn't so important and they have the support of adults to help them develop the coping mechanisms.