The competitive problems between athletic programs in Iowa is complicated, and you can't solve it with easy fixes.
1) The multiplier for private schools might be part of the solution, but people saying "We need to use one like Illinois has!" don't know the whole story. Illinois applies the multiplier to "non-boundary" school districts, because their public schools restrict students to attending only the district they live in. ALL of Iowa's school districts are "non-boundary," as open-enrollment is allowed for everybody. (I know, the receiving school has to approve the request and all, but in theory a student in Iowa can attend any district they want to, whether they live in it or not.) Also, how would this do anything about the dominance of a school like Dowling? There isn't any 5A for them to be moved up to ...
2) Having a "private school only" class, even for playoffs, would be a disaster. You really want to see Dowling playing Des Moines Catholic? Or Mason City Newman playing Sioux City Heelan? The problems we're seeing across the board would be magnified ... but I suppose many people wouldn't give a rip, if it was just the private schools dealing with it.
3) I think the idea of relegation is intriguing ... for football, anyway, schools that overperform in a two-year districting cycle would get bumped up, with lesser performing schools being moved down. That has promise (the earlier comment about Waterloo East being a 2A school with a huge enrollment ... well, they don't play football at a 4A or 3A level, so that probably wouldn't be a problem). This could have problems with schools having a particularly good group of athletes in one graduating class finding themselves moved up just as those studs leave school, but that kind of thing is just going to happen.
4) Believe it or not, things change over the course of seasons. Regina as the bully of 1A? They didn't even make the playoffs in football last year, and their playing numbers have been in free-fall. I don't know if they'll be in the playoff mix this year, either. Assumption's football numbers have been crashing as well - the people who automatically think they should be 4A are a couple of years out of date. Wahlert, same deal.
How do you address the issue of participation at these urban schools? That's really the problem - they have enrollments among the largest in the state, but they can't get kids to play sports and compete at the level of suburban schools of the same size. When that continues year after year, it just gets worse and worse as kids turn away from unsuccessful sports in those urban schools. Finding a way to use factors other than just enrollment (free and reduced lunch percentage, or some other socioeconomic metric) to classify sports programs might be one path for improvement.
I don't have a quick answer. Nobody does. But I think this deserves discussion and thought and new ideas.