...it seems that the League is drawing a distinction between "practicing with" and "participating on."
I guess that's up for some "interpretation". It would be good to get an official explanation from the SCHSL. I was always told that 7th and 8th graders could not practice with the varsity which meant the varsity and JV were not allowed to scrimmage each other if 7th and 8th graders were on the JV team. Of course this is not an issue in the district where I am coaching now since 7th and 8th graders are not allowed to play JV if their middle school has a team and all of the middle schools in our district do have teams.
It is a good question, and I'd love to see an official ruling as well. That would affect a lot of schools, I think, when it comes to inter-squad scrimmages. Since they worded the distinction of "practicing with" and "participating on" so carefully, I would interpret that there is a difference, but I don't have an official source to confirm. Who's been telling you that you can't?