I don't think 90% of users are fighting over kids to make sure they in end up in their country. Imagine the uk merged and scottish teams tank in all divisions, get all the hall of famers. Sounds fair for the english teams to just play perennial allstars for the seniors?
The draft will need to be adjusted of course, but that is a problem as a nation not individually. Each of you people in micronations individually can get MUCH better draftees on average than users who are in league with more human users.
So I agree that as a nation it's not good it would starve micronations of trainable players even more than now. Individually you are basically just get the same deal everyone else has.
Besides, in you example the Scots would get shafted because they would be the minority and there would be a much higher chance that some English manager tanks for picks. So I think you have that reversed.