Overall I share your views.
I think you misunderstand DPOS. It has nothing to do with delegating stakes. In my understanding DPOS is delegating governance to witnesses via stake based voting. Delegating HP doesn't delegate power to vote in governance, it just delegates away power in rewards distribution influence. When you delegate HP you still retain power to use your stakes in governance voting. However, we can delegate that power away to via proxy feature.
Rewards distribution, in my opinion, has always been a battle between short term gains view and long term gains view. Unfortunately, in this experiment majority chose short term gains. Hence, we ended up with bid-bots competition.
EIP changed that and also brought free downvotes that made possible for bid-bots to disappear. But as you state it also gave few a power to take a role of rewards policing. If it was up to me I would like to see how things would work without possibility of delegating stakes for rewards distribution purposes. However, it is very unlikely to happen.
To counter the issues your cover regarding downvotes it would take another force of hive power to mitigate issues when rewards policing goes against the benefits to the platform. That is also unlikely. Most Hive power that is even passively interested to participate seems to be delegated away. That leaves the last option of convincing stakeholders of wrongdoings when they happen, which is a difficult task on its own.
Lastly, I 100% agree about your thoughts on Leofinance and what a great work they have been doing for Hive and its community. However, even that is either being ignored or unnoticed by many stakeholders.