I wasn't at any of the games, but I've been to 100's and 100's of games at all levels over the years and the biggest defeat I've witnessed was 7-0.
On 12th May 1997 in the final Youth League game Rangers fielded a very young team against Cowdenbeath Under 18's because they were playing Celtic in the Youth Cup Final two days later.
Two players I remember who played in the game were Stephen Hughes and Stephen Dobbie, both were 15, the young team collapsed in the final 15 minutes losing 5 goals.
They lost the final 3-2 to a last minute penalty.