Distance
If I understand your scheme you are running something like this:
That is fine.
There are as many ways to operate as you want. A lot of it depends on how you want to operate things, the capacities of the yards, the capacities of the trains and the relative distances.
For example you could run both locals as a turn out of Little Yard and no locals out of Big Yard.
A basic day of pay for a train is roughly 100 miles (more modern eras may have longer basic days by 10-20 miles). That doesn't mean that the local can ONLY go 100 miles, it means that they get additional pay if they travel more than 100 miles. However if they travel less than 100 miles, they still get the basic day.
That means the distance between the big yard and little yard comes into play. If the distance is in the 40-70 mile range then a turn is reasonable, because the total distance the train operates is in the ball park of 100 miles (40 miles out, 40 miles back = 80 miles total trip). On the other hand, if the distance between the two yards is closer to or more than 100 miles, then that makes a round trip more expensive than two turns. Lets say the distance is 90 miles. 90 miles out plus 90 miles back is 180 total miles. 100 miles is a basic day, then 80 miles at time and a half, that is the equivalent of 120 straight time miles. Total mileage is 220 miles. If you ran two 45 mile turns, one out of each end, that would be two basic days, 200 miles, less costly by 20 miles.
(BIG CAVEAT HERE : Rates of pay vary all over the map depending on era, railroad, location, agreement, etc. My examples are hypothetical and I am 1000000% percent sure somebody can come up with an exceptions to the pay rates I have given).
Another consideration is time. If you are pre-1970's the hours of service is 16 hours and if you are post 1976 its 12 hours. The amount of switching and travel each job has, has to be less than the hours of service. If its 1980 and a job has 14 hours of switching, then that won't work, they will have to split the work to keep from hogging the jobs. On the other hand, if the job can do the work in less than 8 hours, they will use a turn because it can do all the work. The ideal thing is to have 8 hours of work for each job. If there is less work, the railroad is paying for work that's not being done, if its more than 8 hours, once again they may be paying more than a basic day.
If there was only 3 or 4 hours work on each local and the distances were 25-30 miles on each side of Little Yard, you could run one job, that would be based out of Little Yard, it would make a turn to the left then a turn to the right and switch the whole subdivision. A modern version would be to base both jobs out of Little Yard and run Local 1 M-W-F and Local 2 T-T-S with the same crew and power.
Bottom line, there is an example for virtually every type of operation you want.
When I was Trainmaster at N Little Rock, the Hoxie Sub had something like I drew, where the local out of N Little Rock ran to Newport on a tri-weekly basis on the south end of the Sub and the local out of Poplar Bluff ran to Newport on a tri-weekly basis on the north end of the Sub, but on the Pine Bluff sub, I had a daily local that ran the entire length of the Sub (like your friend suggested) with a local turn that operated out of Pine Bluff Yard (roughly the equivalent of Little Yard) in the middle of the Sub and handled industries about 10-miles either side of the yard, plus the yard itself. When I was at Spring, TX we had a mix of turns handling 25-30 miles either side of the yard and then long daily locals that ran in several directions. All sorts of options.