It is a real conundrum, there's no doubt about it. You want your expansion teams to be competitive in a reasonable amount of time but not at the expense of decimating your existing teams' rosters.
I've just started a
league somewhat similar to your Replay League. The main differences between the two are that mine is a random debut league in which no superstars or big names are eligible to play, that I have financials turned on, and that as of 1901 (the inaugural season) I have just one minor league, which has been set to independent level. I plan to add another level every so often until I have AAA / AA / A in place around 1950. I think that's as far as I'll take the minors. Players will be added each year via a heavily-screened rookie draft, most likely with just 10 rounds per season just to keep the personnel trickling in and ticking over while still hopefully keeping some roster stability so that players get a career worth of stats. I do not have any managerial involvement in a franchise, it is purely a sim with me as chronicler of the results. At least that is the plan at the outset.
I have set this league to follow the historical MLB evolution and expansion, and am mindful of the challenges involved. Given I'm only in 1901 the first of these won't happen for a while, but if your league is still going when it does I'll report back with my settings and the results derived.
My only experience with expansion so far has been with my main league, which is a fictional in its 11th season. It began with just 12 teams in 2 leagues and gradually has expanded to replicate the current MLB format via a series of 3 expansions of 6 teams.
This league started with the top 500 players by career WAR being imported manually, giving each of the 12 teams a full 40-man reserve roster with a few spare. There were no minors and financials were off.
Then I started adding minors and fictional players from about year 4. I was very selective about the types of players entering the league, having them created under fairly strict guidelines so they could compete with the superstars of the game. What this has resulted in over the years since is an incredibly high-grade league full of quality players. It has been fantastic.
I run a franchise in this one (my beloved A's) and was pretty defensive when it came to the expansion years. The active roster for this league is 30 (15 pos / 15 pitchers) and the Constellation League (as it is known) has grown to have the full complement of minors (AAA / AA / A / SA / R with College and HS feeders) plus a second major league level I call MLB- which is basically an expanded reserve roster for the big league team. So I had a lot of players I'd been nurturing for some time and didn't want to lose them all. But nor did I want the Expansion teams to be completely useless.
In the end I settled on a Protected List of 50, with no per team limit. The way I saw it, the franchises could keep their MLB squad and absolutely top prospects, and the rest would be up for grabs. I saw the no per team limit as a kind of de facto realignment toward parity.
It has worked pretty well. As IRL some expansion franchises have fared better than others - one even won the WS in its 4th year of existence. But there are some dismal failures that remain completely non-competitive 8 years down the track. Which both upsets and annoys me, especially as two of the worst performers - Seattle and Texas - are in my division.
I switched on financials at the start of Season 10, so I'll be watching keenly to see if this changes things over the next few seasons.
I have also been giving serious consideration to expanding again with an extra team to be added to each division. But I am worried all this will do will be weaken the underperforming teams even further. It would be ideal if you could impose a different sized protection list on a team-by-team basis, so that the strong franchises would have a shorter list than the weaker, again trying to gain some parity in the process.
A possible workaround recently came to mind. It is a bit too smart for its own good (which increases the chance of it backfiring) and would involve a lot of work, but if it comes off it may well solve the lack of parity in the present iteration of the league AND allow me to expand to 36 teams in a fairly realistic way whereby the new teams have OK rosters to begin with and the same chance as the others to improve and achieve success over time.
It would involve me expanding with the 6 teams at the end of this season with a protection list of 40 players in place. Then I would redistribute the players drafted back to the 6 weakest teams in the league as it currently stands in a supplementary draft I would have to do off books and then manually reallocate the respective players within OOTP. Then I'd delete the 6 expansion teams. Then do another expansion draft with a protection list of 50 players but this time let it stick. If I have got it right this will improve the weaker existing teams to a certain degree and then let them keep the 50 best players in their upgraded squad, and take some decent players off the hands of the stronger teams without it being too punitive on them.
Obviously I'll save my league beforehand in case it all goes horribly wrong. Either way I'll let you know what transpires.
Anyway, not sure any of this is of interest or help to you but thought I'd share some thoughts nonetheless. Looking forward to continuing to follow the Replay League into the 21st century. Are you planning on just letting it run ad infinitum or do you have a set finishing date for it?