I think focusing on changing the formula in a fundamental way right now is misguided. This ship has likely sailed. Think about it, if you're IG, you've spend presumably a lot of time and energy in revamping the tournaments/Spire, it's been running for months, and you're mostly satisfied with how things turned up, with a possible exception of discontent by a small group of players, at least at the moment? Would you jump in and completely redo the whole thing, something that touches multiple features and literally every single player (tournaments are available from the beginning)? This sounds quite unlikely.
There is an easier way to address disincentives to progress in the late game. Pretty much every other game does that, so I am not sure why it can't be done here. It's inflation, and it's very easy to implement in a localized fashion. You say that doing chapter 17 is not beneficial, because you'll get 20% penalty, but only 10% improvements (not real numbers)? Instead tinkering with penalty function (which is common for everyone, so changes are complicated), what if new chapter gives you 25% improvement? This is something that touches only the chapter in question; more importantly, this can be done for new chapters that no one have seen yet, so those numbers can be whatever they need to be. If you have to scale it exponentially, so what? Plenty of games do that.