I don't think there needs to be any kind of adjustment. Look at other states around us and it could be much worse.
West Virginia 1A
Smallest- Hundred 106
Largest- Ravenswood 433
Hundred went 3-7 in 2010, their best record listed on maxpreps (2004-2017)
North Carolina 1A
Smallest- Creswell 103
Largest- Bessemer 647
Creswell hasn't been very good as of late but had a run from 207-2011 where they had a 46-12 record and never lost more than 3 games with playoff trips each year.
Maryland 1A
Smallest- Hancock 112
Largest Chesapeake 746
A quick maxpreps search showed that Hancock made the 1A playoffs in 2013 only to be rewarded by playing North Carroll HS, a school with 6 times their enrollment and lost 14-13
People are upset that a school has to play school that is not even twice their size in the playoffs when it could be playing a school 6x your size. Sure if you want to cut it at 400, go ahead, then 2A will cut theirs down, so on until we end up with 7, 8, or more champions and it waters the whole thing down.
Or it could be that we do not want to see it get to the point that it is in other states.
Maryland, love that you bring them up, most of their smallest schools have dropped playing football altogether. I wonder why? ...
West Virginia? They made the absolutely awful decision to allow a catholic school from Wheeling to play in 1A..any clue who normally dominates 1A in WV?
As far as watering it down goes, I still have 6 state champions in my proposal. Someone else proposed 4 divisions. I do not see any watering down. Yes, 1A would be weak compared to the other divisions. But they would be anyway. 2A would be loaded in my proposal and that is a great thing. All of a sudden the regular season would actually mean a whole lot. No more 3-7 or 4-6 teams getting in. I think once they went above a certain amount of schools in the division, then yes, split it. But set that number at, say, 80 and see how long it takes for them to get to that point.