Jason, I had a team finish 1-26 with a 24 game losing streak. Two seasons later, we made post-season. I'm currently on sabbatical from WIS and have no active teams. But I've national titles at both DII and DIII
There are 2 glaring problems with your team, and these VERY common with new coaches. You're right, you have crappy Sim players returning. You can cut anyone you didn't recruit with no penalty. HOWEVER, you won't get extra recruiting money for them.
The other problem is your recruiting class. It's very difficult to succeed with defense ratings that low. At DIII, I won't recruit anyone with a DEF rating below 25 and then, only, if they have high potential for defensive growth. In WIS folkore, you can hide one bad defender with a zone defense, but not two. Speed and athleticism also help defense. I like players with good DEF/ATH at PF and C; good DEF and either SP or ATH at guard and SF. I often play a guard at SF.
I'm not a big fan of zone. Look at the top teams in your division. How many play zone? A few years ago, zone was definitely inferior to the other defenses and almost all coaches dropped it. Then, WIS changed the engine to improve the zone defense. It may be that zone is good , but experienced coaches are afraid to try it again.
You have options:
1) Take what you've learned this season, recruit better, and build your team. In 2-3 seasons, you may be .500
2) Take what you've learned and switch to another school.
This game is fun! Good luck!