The only way to reduce supply is to bring STEEM down, or burn SBD (intervention).
Not quite. Conversions reduce the supply of SBD without burning or any explicit policy intervention. See the chart above that shows how, under normal conditions, when the demand for SBD is not changing much, the supply of SBD is quite stable ('net' fluctuates above and below zero, but has an average close to zero over time), with conversions roughly matching new creation. That is to be expected as long as SBD remains near $1 and does not 'detach' (as it has).
Agreed, but right now there is no conversion. We can only reduce supply by STEEM going down, or the burn like you have been experimenting with.
This is exactly why we need a more robust peg.
There is conversion from SBD to STEEM (reducing supply of SBD). It isn't visible in the web UI but it is still usable via CLI or API.
What is lacking is the ability to convert from STEEM to SBD (increasing supply of SBD). The only way to increase supply of SBD now is to wait.