This is exactly right! The current PB cap level is so unrealistic so as to be basicly useless(similar to MLB payroll tax level). When I see teams with allstars at every position, all through the rotation and bullpen and even on the bench, I doubt that any teams in PB have ever been affected by it. It should be drastically reduced.
Combining this with a lower player retention level would actually create more of a similarity with real life where free agency, budget considerations, etc result in a certain amount of player movement for virtually all teams.
Having the FA draft performance related is also a key component in having a competitive situation. After all, isn't that what it's all about? Competition. I would think it would also make it more enjoyable and challenging for the expert owners. I'm sure these strong operators and aggressive traders would always find their way to the top.