Depending on the type of leaf they can mat down. This might cause water to run off. But if you have a basin, a mixture of leaf types, or rough them up with a hoe; they would probably allow water penetration.

My yard is surrounded by trees (mostly large oaks), and I've used them as mulch for years. I like to chop them up with the lawn mower, which deals with the matting problem that fruitnut pointed out and creates a nice fluffy mulch that breaks down slowly and adds much need organic matter to my clay soil. I also used chopped leaves for making compost/leaf mold to improve my vegetable beds. One negative, though, is that in a mild climate like mine (and yours, presumably, since you're in zone 7), leaves provide great shelter for slugs, snails, earwigs, pillbugs, etc. which, potentially, can do a lot of damage to tender vegetation. I've stopped mulching my vegetable beds for just this reason, but I still mulch around all of my perennial fruit trees, berry bushes and canes, etc.

I mulch all of my trees with leaves. I have a landscaper buddy that brings them to me in the fall. I put them in a pile about the size of my garage. by the spring the pile is partially composted and about 1/3 the size. I use this mulch spring and summer.

Generally, leaves are excellent mulch or trees probably wouldn't go to all the effort to use them. Trees mulched with leaves create the soil in which forest trees have evolved with a distinct parfait of textures unlike homogenous prairie soils.

You can also create a leaf pile and after they break down a bit will be unlikely to blow away (and won't mat up as leaves from some species do). Completely composted they become forest humus, pound for pound the most useful soil layer in the forest.

One year I mulched my garden with leaves but did not chop them up. The garden grew like it never had before, until the slugs moved in and ate everything. I should have shredded the leaved so they lay flatter and maybe the slugs would not have been as comfortable.

Should have baited out the slugs. We get them most every year like that- mulch or no.

How do you "bait out" slugs?

with sluggo.

Used to use a poison that is used as fuel for cooking but now only less toxic stuff is readily available- some form of vitamin D I think. It works OK.

There's lots of other strategies like setting out saucers of beer to drown them or trapping them under orange peels or boards.

+1 for Sluggo. Better yet, Sluggo Plus w/ spinosad (for pill bugs and earwigs). Without it, my garden wouldn't exist.