" then the value of rewards would not go up."

The displayed reward level may not increase but the market value for which those rewards would be trading on would indeed go up if you reduce the supply.

" But what is actually happening given the overvaluation of SBD is that something like 50% of market cap is being paid out per year"

On a blockchain level that is not true at all. That is uncontrollable free market prices that should come down over time with sustained sell pressure from an increasing SBD supply. You are fighting against that by burning supply. This burn project literally helps prop up the high price of SBD. 

The formula for production of Steem and SBD is still printing at the intended rate.  As long as people chase the high SBD price by buying up Steem and increasing it's price then the rate at which SBD is printed will increase.

Burning the supply doesn't help alleviate the free market over valuation of SBD.


"Returning a portion of that excess to stakeholders hardly 'hobbles' anything"

If that is true then it also achieves nothing. You can't have your cake and eat it too. You can't say this is lowering payouts only for abusers, it lower payouts for everyone.  

If your premise is that high paying posts attracts abuse you have also recognize it attracts legitimate use as well. High paying posts are a fantastic marketing tool and lowering them across the board would indeed be hobbling that.

"this should have at least a small effect on reducing the overvaluation of SBD"

Burning supply does not decrease market prices if demand remains static. I see nothing that addresses overall demand so this would increase the overvaluation of SBD.

Your goals aren't in question you seem to be trying to achieve something in a decentralized fashion that is completely fair. I just disagree on how it will work out.