It's very much still possible to develop under System 6 today. The main development systems that were in use when System 6 was king still work today under System 6, of course. The main two that I had experience with were Lightspeed C and Macintosh Programmers Workshop (MPW,) a powerful development environment that supported C, Pascal and assembly language programming. There were others, but most of them never really established a presence. MPW 3.1 and earlier run under System 6 only - the Finder under System 7 refuses to launch them. MPW 2 will actually run on a Plus with only 1MB of RAM but requires a hard drive; MPW 1 can actually run on a dual-floppy Plus. Even more amazing was the Macintosh Development System, an assembly-only tool that was Apple's very first tool for developing on the Mac (earlier Mac software was cross-developed on the Lisa). MDS will run on a Mac 512 with System 2! The only problem today is finding these tools, as there are few original copies in existence, and they're not available new any more. I still have my original MPW 3.1 install disks from 1990 - but they're not for sale!
To understand MPW, it's best to start with the book "Programming With Macintosh Programmer's Workshop", by Joel West. The first edition documents MPW 2, and the rare second edition covers MPW 3. It's a very well-written book, one of the best introductions to a development environment ever written. Apple still recommends this book (it's long out of print, of course.) However, MPW is still a current product from Apple, and it's free for download, along with documentation, at http://developer.apple.com/tools/mpw-tools/ . Although the current version of MPW requires System 7.5 or above, most of the documentation also applies to the earlier versions.
Lightspeed C (which later became Think C and even later Symantec C++) and Lightspeed Pascal also ran under System 6, but I've long since forgotten the details of these environments (other than poor library support).
If you have any information on other development systems that run under System 6, especially if you know where copies can be found, please let me know at electroman@rocketmail.com .