With all due respect, Weena...I'm going to have to disagree with some of your advice here.
I think that your approach listed above can definitely save some money and perhaps prevent recruiting disasters that result from higher division schools swooping in on your targets. However, holding yourself back from going after those recruits that are "too good" will probably also prevent you from becoming an elite team.
Just because a higher division school could or should pursue a recruit, doesn't mean they will. Ike1024's back-to-back championship teams in Wooden D3 were anchored by Freddie Lyles, an uber-stud who should have been signed by a D2 school. His ath/spd/def was something like 70/80/90 and his per/bh was 90/80 I think (perhaps ike can post his ratings). He basically had no business being on a D3 team. But, if ike didn't take the risk to sign him, he almost certainly would not have won two NTs in a row.
Recruiting is all about calculated risks. Don't shy away from signing a player because he's too good for your division. Survey the landscape for higher division schools that may go after your targets. Count the number of openings they have and the note the positions they need. Look at what states they typically recruit. These factors, among others, will help you gauge the probability that you'll have to compete with a higher division school.
But, in the end, I think it's better to take the risk at greatness than sit back and settle for less.