Is it an illegal pitch when...
 

Is it an illegal pitch when (12u ASA) the pitcher on the pitcher's plate, starts her motion, realizes the PU had not fully reatracted his hand up to allow the batter to get ready in the box, stops her motion, the restarts almost imediately when the hand is dropped?

Is the PU just nickpicking here if he does call illegal pitch, aftere the pitch is thrown? Then awards the baserunners (bases loaded) a base giving them the only run in a 1-0 final. I understand that is the penalty, but he had his hand up for goodness sake.

Absolutely not. If PU has his hand up and F1 pitches, what happens next? "NO PITCH!!!!" Why? Because PU has effectively called TIME, even without the actual words. So if the pitch wouldn't count, neither would the illegal pitch.