The reason why you want to sign local players is that it is MUCH easier to hold onto them if things go south. Long before the USC implosion I made a comment about them going for so much OOS talent being VERY risky if things went poorly and doubting they would hold onto everyone.... and that prediction turned out to be more spot on than I ever could've guessed.
When you recruit someone OOS then you have to worry about all of the local schools hounding them 24/7 and the local pressure to stay close to home. This doesn't matter if you're the national champs and recruiting a kid from, say, Kentucky... but even with a great year it can be hard to hold onto a kid from a hot bed state (TX, FL, CA) if there is a local school also having an awesome year.
So yeah... most people believe you should recruit inside-out. Identify local prospects with top tier talent and try to sign them and then move on to OOS talent as necessary. Urban Meyer doesn't think so... he doesn't care at all where his talent comes from even in a pretty darn talent rich state in Ohio. Brady Hoke does think so... and the reason why Michigan's class didn't implode last year is that so many of their players were from Michigan and Ohio. So there are definitely different perspectives but I'm always MUCH more enthusiastic about an early commit who is either a lifelong ND fan or local than I am about one from a big time football state where we have to hold off teams for 12 months.