The report by Jennifer Dobern of The Associated Press sums up the issue:
McLellin's claims raise questions about whether Smith was padding the Mormon story as time passed, or whether McLellin was so embittered that he was trying to undermine the church.
The report itself has some incongurities that a close reading exposes. The statement above is related to the comment:
McLellin said he never heard Smith tell of what is now known as his "first vision," the visit by God and Jesus Christ to a young, prayerful Smith in a grove of trees that led to the church's founding in New York state.
McLellin said he also wasn't aware of the angel Moroni, who led Smith to buried gold plates that became the church's foundational text, the Book of Mormon, or the story that John the Baptist had appeared to Smith.
Yet, earlier in the story it reports one of the co-authors as saying, "McLellin's struggle was with Smith and a changing church, not Mormon theology," a rather dubious claim considering the above explanation of what McLellin says. It is apparent that McLellin did have some serious issues with Mormon theology, at least as it developed over the years.
It still leaves something to think about, considering the implications of his criticism. As an isolated statement I would fully believe McLellin had never heard the "First Vision" story, as it wasn't that important at the start of Mormonism. A closer look at what we do have shows it was considered more of a personal rather than organization Vision. Before Joseph Smith wrote it down as part of a more complete history, it was mostly known from diary enteries and personal interviews. It was even consistant with a typical, but still contraversial, "born again" religious experience.
The more problamatic statements really have to do with the Angel Moroni and John the Baptist. These also bring McLellin's version of early Mormonism to question. It can be argued that Joseph Smith's pre-Book of Mormon religious discussion didn't mention an Angel. What cannot easily be refuted is that he did teach about the Angel Moroni at the time The Book of Mormon was published. Even his critics recognized by that time there was the story of an angel delivering the plates.
As for not aware of the John the Baptist story? Again possible, as the development of the Priesthood is to this day far from completely understood. Putting down the history back in Joseph Smith's day was not like keeping a blog. Still, it is hard to believe that he wasn't told any of this considering his position in the Church. There were other members who both remained in the higher leadership positions and those who left the church whose writings seem to refute McLellin's version of events.
Most of the problems I have with the idea that Joseph Smith "developed founding stories" is that Mormonism can't be understood without them. That doesn't neccesarily count with the First Vision, but it does a lot of other teachings. For instance, how do you explain the Book of Mormon if you don't mention Moroni (or at least an angel)? The three witnesses of the Book of Mormon are very specific about an angelic ministry. Same goes for the priesthood and baptism, since angelic deliverance of the Priesthood and Authority are clearly taught early on in the journals and history of the time. Again, critics of the LDS Church witness specifically these things were taught even if the details don't mention angels by name. It was all very scandalous and brought persecutions and condemnation.
Without reading the material by McLellin, it is hard to understand what he says was taught from the start. A simple declaration of what wasn't taught needs to have an alternative explanation for what is known. Where, for instance, did McLellin believe the authority he was given as an Apostle come from? It might be McLellin is correct that he wasn't taught some things and was increasingly disturbed as he learned the particulars of the faith. He was not with the LDS Church leading up to its development and left before much of the revelatory innovations. In the end, the papers will do more as a snapshot of McLellin than early LDS history.