Everyone (minor exaggeration) in Britain is eligible to play for every other nation by one means or another and they wouldn't lose English eligibility by playing U20s would they>
Wales, instead of like Argentina (Argentina XV, playing in the ARC) and England (Saxons) etc. Have chosen to make their U20s side their A side, and so lock off eligibility for everyone who plays against France, South Africa or Fiji U20s (other teams who've nominated their U20s as their A Side), as well as the full squad named for the Junior World Championship.
This has been genuinely enforced. When Scotland were struggling for Centres back in 2012 (glory be to our riches now) we selected Steve Shingler in our training squad for the 6 Nations, and Wales launched an official objection on the basis that he'd played for the U20s at the JRWC, because he didn't play in the France game in the 6 Nations, the SRU were under the impression that he wasn't locked in, but World Rugby/IRB confirmed he was tied.
While there are no limits to the number of Visa or non-English players in a Premiership Squad, the RFU provides a significant amount of funding with the condition that a certain percentage of your match day squads and greater squad are English Eligible, and with more and "foreign" players taking up contracts, every little helps.
It doesn't and wouldn't stop the cream from turning out, but there'll be a small handful of boys who the WRU would like in the squad turning down selection, either because of English ambitions or fear of losing their place at the club.
I'm also not entirely sure how the British Isles are dealt with to be honest. In football, FIFA says work it out yourselfs, so they use FIFA rules for the 4 Countries, plus individual Crown Dependencies players get to align with whoever they want. Not something I particularly care about unless Indyref 2.0 comes about TBH.