Thanks for your suggestions (to be considered in the future, so to speak). They are quite different from anything we ever considered. Your second proposal would be problematic since it’s a step function, so it can be profitable to cut a validator into two (which is something we want to prevent). In the first proposal, stake splitting is “free,” so big validators could just split into many medium size validators and then drive out the small ones by taking all the slots.
From a security point of view it would be best to have n independent validators, all with roughly the same stake, with n in the area of maybe 100. Rather than having more, we would like to have more (geographic) diversity. Having 5,000 validators in close geographic proximity does not make the system more secure.