Shawn,
While you have some valid points, I think you are forgetting one very important point. Most teams go the same timeframe every year. We already have lost thousands of teams, how many more will drop when they are told they can't bowl the times they want? How many will drop because the bowlers on those teams, whether because of work or personal commitments, can only bowl during the times you are now eliminating? It's not as simple as let's just shorten the tournament. As discussed there is no quick win here.
On edit: Also, I think you forgetting a few other points. Moving your D/S off the 10:30 squad is saving money. Workers get to go home earlier, so they aren't getting paid if they are hourly employees. And squads not being 100% full usually happens at the NBS. Do you realize how hard it is to get 80 teams to pick the same day and time (when we had all 80 lanes available) and now with the drop in teams, it gets even harder. You have to remember the size of the venue you are talking about. And as far as brackets go....I think it would depend. Remember there is a max that people can enter....if you already have more brackets then that max, will there really be additional ones with more people? Also, how many people will drop out of the brackets when they see that now that their squad is full, there are additional better bowlers there and feel they might be wasting their money now? I think the potential is there to see a drop in bracket entries in your scenario. I wish the answer was just as simple as the solution your put forth. The reality of it is that the problem is much more complex and the answer will have to be the same.