More, smaller groups would still have the same problem however as the same proportion would still qualify from the group. Take say, 64 teams, out of which 32 qualify...no matter how you break up the groups, the top half of that group would qualify...8 groups of 8 would have 4 qualify from each group...and 16 groups of 4 would have the top 2...so having smaller groups would make no difference to the competitive element of each group. The only way to increase (or maintain) competitiveness would be to have fewer qualifiers overall...or increase the number of teams in the qualifiers in line with the finals...so we'll need some new countries...
Also, smaller groups would mean fewer matches = less cash...(unless you make them play each other 4 times...which would surely make the whole thing ever more farcical)
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