I personally enjoyed this episode greatly. True, it felt slightly filler-ish, but I think it had more purpose than simply to take up space.
Although it might not be readily apparent if you simply take everything at face value, a lot of the episode's focus seems to be on Ash. It helped to establish Ash's character to a newer audience, while also showing how much Ash has grown throughout the series to the older ones.
Starting from the top, in the beginning of the episode, when Ash loses his hat as the kids stampede by with Yabukuron. Aside from the initial annoyance, he doesn't seem all that bothered. Contrast to when he first lost his Ash to Mankey early on in the Kanto season, where he spent an entire episode essentially raging around trying to get it back, and later on during the Hoenn season, where, though handled much more maturely than before, he still expresses irritation when Aipon also steals it. Here, rather than dwell on his lost hat (outside of retorting to Iris), he's more concerned about the apparent problems that the kindergarten teacher and the children are having, showing a heightened sense of priority compared to prior seasons. Furthermore, although one of the children, Hirota, is clearly wearing his hat, he doesn't make a fuss about it, and, in fact, doesn't even bother mentioning it at all. Hirota, who eventually grows to trust Ash, returns the hat of his own free will, which Ash accepts with grace. In other words, we're already shown just how much Ash has grown since Hoenn.
When he learns of the overall situation, as well as the "base" that the children have put up, Ash is able to empathize with the children, something that none of the other characters were able to do. He attempts to infiltrate their base, and although captured, quickly gains their trust. Although he initially tries to get the children to make up with the teacher Yuri, once he sees just how much they love Yabukuron, he becomes much more sympathetic to their cause, and even battles on their behalf against their teacher. Although this might seem needless and even outright uncalled for to some, to Ash, who dearly loves Pokemon with all his heart, this course of action is the only one he could take. He sees that the teacher is unable to come to terms with the children, and since the children aren't able to do so, he fights in their place. Thus, we are shown another very important aspect of Ash's character: that he will always charismatically stand up for what he believes in. It's simple and perhaps obvious, but it's still a key part of who he is.
Finally, at the very end of the episode, Ash is shown enthusiastically cleaning up the kindergarten grounds, despite having no obligation to do so. This shows his sense of responsibility and basic desire to help people, a trait that some viewers often take for granted. Certainly, he had no reason to get involved with this whole experience, and to some, the episode may have been little more than a detour to Ash's training journey, but it simply wouldn't be in his character to ignore it when someone is in trouble. Ash simply wouldn't be Ash unless he stopped to help every single person in need he came across. True, it kinda impedes on his progress, but I think it's more important to grow as a person before you grow as a trainer. Ash accepts everything as an important lesson to learn from, and this incident is no different. And besides, such kindness and empathy are precisely the reason many of Ash's Pokemon even took a liking to him to begin with so you can't say such traits are entirely unhelpful to his training.
Well, Ash is still pretty childish. He's in a near-constant state of enthusiasm over every little new thing he sees, he has a tendency to act before he thinks and he's, well, a ten-year-old boy. But he's still growing, maturing, evolving in his own way, and the empathy and kindness he displays regularly are all proof of that. Sure, he's not the greatest trainer in the world, but as a human being, I think he's seriously come a long way, and this episode does a splendid job of showing that. And like I said before, personally, I think that's equally, if not more important, than his growth as a trainer.