Greendog,
You're right its about perspective. See the internet link below to get a perspective on how the Kansas system compares to other states. Its pretty interesting.
http://www.indianamat.com/stuff/statebreakdown.html I agree it would be tougher for smaller towns, but they still could find a method to win team championships by an added dual format or you could score 4 different team classifications based on the scoring from the individual tournament.
You're also right that there would be less parents, coaches and wrestlers at state but it would be a lot better for the fan instead of the chopped up 3 location sites they have now. I think you would see significant fan growth as you would be show casing the top talent in the state. Just think about the anticipation you would have for the Dulgarian vs Lambotte matchup.