Yeah, I totally get the argument you've built. For Grimace and others, I'm saying it is a logical set up as well. In a competitive game, you could see where at least in the same conference, folks would want equal footing, without artificial advantages based on success of a team in real life. Having the league structures in into tier 1, tier 2, and tier 3 conferences at D1 and keeping teams in each on equal footing is not contradictory, it is just setting up a game.
Baseline prestige should represent something in real life. I'd say that means that even when teams have a period of down years, they'd still have the reputation, facilities, fan base, etc to have relatively high long-term prestige to recover to success not based on the coaching program. This would be the case at D2 or D3 as well, regardless if anyone has heard of any of the teams. That's part of the point. If it is so critical, it does seem D2 and D3 do just fine without them. Second, if baseline prestige really wasn't based on the success of a certain coach, in real life, why would certain teams need to roll their baseline prestige down in the game? Must have been short-term, not really baseline at all in the first place.
Just saw the other note, yes, I think the emphasis schools put into successful programs would have even more of a relative advantage at lower divisions. Having better facilities, money, strong bases, compared to teams that leave their programs in relative neglect? You could make a strong argument that baseline prestige is more relevant at lower divisions, although I wouldn't want to see D2 ruined.