Agreed. I think most of us can see that things are out of whack. The problem is that no solution exists that can cure the disease. Every rule we implement can have an adverse effect on a school that has done everything right.
Being from Hiland, I have seen this from both sides. Despite being an excellent small school program with outstanding coaches for about 40 years, and despite some popular opinion, Hiland has usually been the little local engine that could. It's not an easy place to transfer to because it is a very different culture, removed from major employment centers, costly and limited housing, among other things. So most of these 40 years, Hiland played against the "stacked" teams and won some, lost others. If they did get transfer sprinkle in, they were from contiguous districts - some good players and some projects, but nothing that would shift competitive balance.
In 2010, a 6-7 junior moved in. Parents were divorced and mom took up residence in Berlin and enrolled him. The family had deep ties with the former school. Dad coached there at one point. The kid was unhappy with his basketball situation and the family decided to take the slings and arrows for him to try to get him happy.
This was a very talented kid. Not the greatest athlete, but good enough, and he had all the other things you want in a basketball player.
He joined a team of all local kids that had size and talent that had never been seen in these parts: a 6-5 G who was 2 time state POY, a 6-8 G, a 6-7 post, and a PG who was almost perfect for that role. And a very deep bench of really fine players, some that couldn't get playing time.
They were probably the betting favorite to win state in 11 before the transfer. After it, they became prohibitive favorites - and they cashed that in for 2 titles. Even then, Bishop Rosecrans and Richmond Hts dang near knocked them out during that time.
That transfer made a big difference because of how talented and good of a kid he was AND because of what he was being added to. That showed me that competitive balance gets tilted not from the number of transfers, but from the quality, that only one can do it, and who the transfer is added to affects it.
All that said, people should know that all of that size and talent Hiland had equated to several division II college scholarships and a few D III college players. So, as amazing as it was, it was so only in the context of a rural small school. It was not a deal where major or mid-major future college players were on a D4 team.
One more observation:
It's only a handful of teams that cause the competive balance problem, mostly in the lower divisions. The typical situation is 2 or 3 elite AAU teammates who are D1/II college recruits decide to play together at a small enrollment school. I would estimate that in most years it is not more than 15 schools.
So, if there was a way to identify those schools who create the problem with an unnatural influx of talent, evaluate them for their talent level, and then slot them in a division where they are qualified to compete, that would be a system that would actually treat the disease.
Easier said than done, and like you noted, I'm sure there would be some kind of unintended side effects with such a system, but if we aren't going to be honest about the cause of the problem and address it, I'd prefer we do nothing about it.