Would it be better if all the I/O pins on the micro-controllers had PWM?

http://arduino.cc/en/Tutorial/PWM

http://arduino.cc/en/Tutorial/SecretsOfArduinoPWM

On an UNO, the PWM pins (3, 5, 6, 9, 10, or 11) are all available to you for output but there are caveats, for one, there are only 3 timers shared across them so changing a timer can affect a PWM output frequency for example, there all fundamentally 8 bit resolution, though with some simple code changes you can get a 16 bit PWM if you leverage timer 3.

Not all outputs support hardware PWM but there is nothing stopping you from running some under software control except it ties up CPU resources to manage it, which is where in a moment I will point out part of your code that could be improved

PWM is a very handy feature and is great for simulating an Analog output (Hence using the AnalogWrite function to control it). The reasons you may not want to use PWM could be your controlling a relay or other device where a pulse train could actually cause issues in the control system or that you just simply want ON or Off and therefore why waste the additional resources (Hardware) and therefore power consumption to do that

at the end of the day it is simply down to choice and suitability for the task, that's the beauty of programmable logic, if you want to change something then simply upload new code

now that comment on your code

Using Delay in the way you are introduces effectively a stop on all processing while your "Waiting", this is not good if your trying to monitor and control a whole bunch of different things. What is better is to use a variable and soft control the wait times rather than Wait a specific amount of time.

like this:

const timerOneDelay = 500 // milliseconds
const timerTwoDelay = 1000 // milliseconds



double timerOneWait
double timerTwoWait
int breath1 = 0;
int breath2 = 0;
int breathCount1 = 1;
int breathCount2 = 1;



setup()
{
timerOneWait = mills() + timerOneDelay;
timerTwoWait = mills() + timerTwoDelay;
//... Other Setup stuff
}


loop()
{
     //do stuff....
     breathLEDs(); // process breathing of LEDs but they will be very quick as no delays in returning


}


void breathLEDs()
{
     // now these work independently and you can do other stuff without delay
     if (timerOneWait < mills())
     {
          breath1+=breathCount2;
          if(breath1 == 255) breatCount1 = -1; // now decrement
          else if(breath1 == 0 )breathCount1 = 1; // now increment


          analogWrite(LED1, breath1+breathCount );     
          timerOneWait = mills() + timerOneDelay; //reset next breath
     }


     // now these work independently and you can do other stuff without delay

     if (timerTwoWait < mills())
     {
          breath2+=breathCount2;
          if(breath2 == 255) breatCount2 = -1; // now decrement
          else if(breath2 == 0 )breathCount2 = 1; // now increment


           analogWrite(LED1, breath2 );         
           timerTwoWait = mills() + timerTwoDelay;
     }
}

Thanks Peter I have learned a lot from this.

your welcome, let us know how it goes