1. Salaries should be -higher-, not lower! Why will any self respective smart person want to throw their intelligence away for a pittance? You want them to be smart with science and stupid with money is it? Live like Diogenes?
2. There shouldn't be more researchers, there should be less. My decade-long experience with academia has been that too many people who aren't exactly scientifically smart (more smart at socializing and grant writing) are too established. We need to recruit the type of minds that are truly capable of innovation and make sure they don't have to compete with beuraucrats who're there simply because they chose biology in undergrad and just kept making the default career choice every time they were presented one. These new people should also be REALLY smart, not just marginally better than public. Which means that there can't be too many of them anyways. They should then be given resources that don't inherently convert the entire system into a Ponzi scheme (like the phd system now does). In the grand scheme of things they can be given lower resources if they are given structures to manage things well.
3. I'd argue that the tenure system worked quite well despite its flaws. If anything tenure doesn't give the same guarantees it gave half a century ago, so people are still incentivized to continue running the rat race. If you still want to hold them accountable maybe a much longer cycle might be okay, perhaps 15 years? 5 year contract sounds like hell for most fields. Some of the most interesting work I did took more than that time to bear fruition and that's not uncommon.
Only thing I'll agree with you is that we should make sure that whatever new process is conceived must try to correct perverse incentives for women, given how the current system plays against some common life choices they might want to make (having kids).