Hi Missyd I had to do an observation very similar to the one your talking about.It sounds to me to be stepping stones assessment scale 6 of physical development which is
Uses small and large equipment, showing a range of basic skills
In my oppinion i would say that you sould be observing boths skills (throwing and catching).
we started our groups of two fairly close together then through observation if it seemed to easy we moved them further apart and vise versa.We also started off with large balls then swaped them with small balls if they were coping with the task.
Hope this helps a little
the Foundation stage assessment guidelines are very useful ask your teacher if he/she can profide you one.
Good luck kerryl xxx