How common is it for kids that neither live in nor go to school in the residency area for a league to compete on the all star teams for that league?

Is it a big deal or is the "he actually lives with his aunt" something that is generally accepted?

where they go to school has no bearing on what league they play in. Where they live is the determining factor.

I understand that, school was only mentioned because at least in this area the boundaries are set by school boundaries.

Is getting around the residency restrictions by using the address of a relative that lives within the boundary something that is commonly accepted?

it is not, but its hard to prove cheating. If the parents signed the affidavit saying he lives with the aunt, then the district administrator really has a hard time calling them liars.

Seen it once in our district. Family rented an apartment so the kid could be on the "correct" all star team (this was a league that had to field two teams. He was outed by another parent in the league. They had neighbors testify the kid lived with his parents (not in the apartment). Still they got away with it.

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where they go to school has no bearing on what league they play in. Where they live is the determining factor.

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They did change the residency requirement in 2014 so that schools attended was a criteria for league eligibility.

http://www.littleleague.org/assets/forms_pubs/tournaments/residence-eligibility-requirements.pdf