It depends. Let's say the top 64 schools officially break away. And as part of that, they agree to only schedule each other. You get more games between teams with larger followings that way. More people are going to tune in to see Michigan State vs Arkansas than Michigan State vs Akron. More eyeballs = more money.
So, it's not that the sport is more popular overall. You might have less people watching college football in total, but it doesn't mean that the top 64 teams will necessarily lose viewers. They may even see an increase. If you're a casual Central Michigan fan, maybe you start following Michigan State? That kind of thing.
Exactly.
It is in the execution of the culling. And legally, it won't be fast. Just a slightly faster suffocation of anything not in the top 48 or so. Then in a generation, maybe you could see a formal separation, but there may not be a need to. The P5 has little issue with the American as long as the American doesn't have much power to determine rules, or has a rubber stamp vote. Soon it will just be a P2 (revenue), P3+ legally. Something like 7 or 11 spots for P2 in the CFP, 1 for the third conference, unless the G5 has a top-5 ranked champ
A big tent top 48 likely does better long term overall, but certainly better per school. It has better product identification, consolidation of talent, more structure, etc. If there is currently a big market in terms of CFB, it will be included.
Does anyone see the NFL expanding to 68+ teams any time soon? No, it wouldn't really grow the product much, with many more mouths to feed.