I'd make them whatever the most prestigious team would see them as. So if the most prestigious DIII team sees a kid as DIII, then all DIII team would, but some teams may still get the back up message (or out of my league) message, just as the D- DI teams get when calling the #1 recruit in the nation. In those cases, the D- DI team still sees the #1 recruit on his/her screen, just that they are unattainable.
Of course there is overlap. And A+ Duke isn't going to recruit bottom of the barrel crap that a D- will recruit even though both are DI recruits. So in that case both Duke and a D- DI school would still pay for recruits it wouldn't use, but they wouldn't pay for ALL recruits in the state. It'd be a better system than the one now, but it wouldn't be perfect.
The problem in my view is that recruits are geographically generated by number of schools in a division, not total # of combined DI, DII, DIII schools. It's inconsistent to have FSS function around total number of combined DI, DII and DIII schools if recruits aren't generated that way. It also inconsistent to have a minimum cost. Take Hawaii. It must pay for more DII recruits than DI recruits (and is subject to a minimum) even though it plays in a BCS conference and competes against the UCLAs, USCs and Dukes of the world for bragging rights. Based on how recruits are generated that state "might" see one recruit that would be worthy of a BCS team.