There will be more blurring of the lines because the under 23 squad will need to borrow from other squads to make up the match day numbers, but I don't think the first team will borrow from the under 23 squad nearly as often. Unless one of the players is a bit special of course.
Allen said the under 23 squad will have a base of 10-12 players. Which is bare bones. If players get injured - which almost certainly will happen - or the first team starts relying too heavily on the under 23 squad, it'll prevent that squad from operating properly. If, for example, the first team borrows 2 players, which then prevented the under 23 squad from being able to field a team for a game, and as a result it gets cancelled. What then? Are the remaining players meant to accept that? How is that helping their development?
I don’t think it has been mentioned, but how often are they hoping the under 23 team will play? Weekly, maybe? Certainly no less than once every two weeks. I doubt players will have agreed to sign if they were going to be playing less frequently than that. So with the first, youth and under 23 teams all playing concurrently, there has to be sufficient numbers, otherwise it just won't work.