(Big sigh)
WLF, you know we agree on this. What we need is a three-tier competition. Schools should be placed on the tiers based not only on 1st XV performance but also on the number of teams they can field and the depth and aspirations of the Rugby program. That's important because some schools field relatively few teams but are highly competitive at 1st XV level because of the way they recruit in years 11 and 12. A school like that might find itself in Tier 2, because it can't field many teams against, say, Joeys. The bottom tier should include schools like Grammar and St Aloysius, who want to play Rugby but are limited by the academically selective nature of their intake. There should be the prospect of movement between tiers and the traditional CAS v GPS (and CHS, ISA) games should remain so as to preserve those traditions and give outstanding players from the lower tiers a chance to show what they can do in higher company.
The only argument against this is "tradition". I don't dismiss that lightly. But when you and I were at school, boys used to be caned, and no one wants that to return because "tradition". Also, it was "tradition" that Sydney Grammar produced Wallaby captains, and that tradition has aged so well that Grammar now plays against the 3rd XVs of other schools. Clinging to things that don't work any more because of tradition is just plain dumb. Plus this: there's an important safety factor at play. One day soon a 70kg kid who wants to be a nuclear physicist is going to collide with a 110kg kid who already has an NRL contract, and it won't be pretty.
I'm not sure that the schools can work this out on their own. The real problem (apart from "traditionalists") is that some schools would find it humiliating to no longer play against top-tier schools. They'll resist change (so that they can continue to lose 0-55 to Joeys). Perhaps this is something Rugby Australia needs to address. After all, the independent schools are their best nursery... they may as well give it some care.