HBD is supposed to be a MLB simulation.
Certain allowances have been made because the realities of the game. In HBD every team has the same budget to start the season. There is no penalty for losing in HBD. Attendance doesn't go down. Owner can't fire you for sucking. GMs can quit one team & pick up another team at any time, leaving chaos behind & no penalty stepping into the new team. So some rules need MLB rules need to be adjusted.
The current HBD system supports a certain strategy. Plan your 25-man roster to last 140 games (until roster expansion). The MLB system supports a different strategy. It values depth & situational tactics. People can probably debate forever which is better. IMO, that means since HBD is an MLB simulation, the game should change to be more like MLB. (Mike disagrees. I don't expect anyone will change his mind.)
In MLB, players come up & down from the MinL all season long. Look at the real-world data. The average ML team has a lot more players appear in games than the average HBD team.
Rotating the 23-25 men throughout the season is a common practice in MLB. No data supports that hurts a player's physical skills.
In MLB, demoting a player does not cause that player to run slower, or loose power, or hit LHP worse. It might actually motivate him to work harder on his game. So a demotion bonus is possible in MLB.
The current way the demotion penalty works in HBD is not a realistic simulation. IMO, it's silly.
Just like in MLB, there should be some limits on promotions & demotions in HBD.
Some more realistic MLB example that could be programmed into HBD include:
There should be a minimum number of days at a level before a player can be moved again.
Players who are bounced up & down too many times should refuse to resign with that team. Easy enough to have some MinL players refuse to resign, just like some ML players do. Same for 6 yr FAs.
Players that see their teammates being bounced up & down should frequently refuse to resign with that team. A FA negotiation message like, "I don't like the way you treat players around here. I'm going to see what I can get on the open market. Talk to me then." Easy enough to change the program so you can't always sign a last year arb player to a long-term contract and to modify the "I won't sign" logic for older FAs.
Repeated promotion / demotion could result in a ratings hit. Never just 1 or 2 demotions.
Tie demotion penalty to performance. Player is hitting .350 when he's demoted, he believes he belongs at that level & gets a ratings hit. Hitting .200, no penalty. He hasn't proved he belongs.
Rating hits could only apply while that player was on that team. Change teams & the ratings are restored. (Probably hard to programming into the current game, so this is probably not worth the effort.)
Any of these are better than the way it works now. I'm sure there are a lot of other better systems. When/if HBD is spun off, maybe some improvements will be made.