OSU is doing better with diversity as an urban school. Without initiatives to attract underrepresented students and priority for it, OU naturally attracts a Miami type student. The average ACT score from the suburban high schools to Ohio University is 3 to 4 points higher than what Ohio accepts from the Appalachian region. Vedder is right in that the campus is designed for 15,000 students and it should be a Public Ivy. Instead McDavis moved it in the direction of becoming an access schools which has some advantages. More students means more tuition for the budget and state money which keeps the cost of attendance down. With Kent and Toledo they've improved their academics a lot over the past 30 years. What I would think is solution is to push for a University of California type system where OSU, Ohio, Kent, Toledo, UC all get elevated research funding as a first class university system. Otherwise I don't believe there is a way to turn around OU in the rankings without special state status. SUNY brand is another success like this because the SUNY label implies first tier/land grant quality.
While I certainly am in favor of being more selective, I've never much cared for the "public ivy" concept. The Ivy League has as much to do with elitism and social cache as it does with academic excellence. While Miami might desperately crave that elitism, I don't think it's something that Ohio should aspire to.
As for restructuring the system, I'm 100% in agreement. The system is overbuilt and redundant and has long been plagued by internal competition. That's also a system that Vern Alden fought very hard to create mistakenly thinking that Ohio would get to move to selective admissions with Miami only to be played like a fool by Millett.
As for undoing the damage of the 1960s which still lingers on today, I like your idea, but for it to work politically you'd need three tiers: OSU on top, the Ohio-UC-Kent-Toledo group in the middle and then everyone else. As the state Senator I worked for said about the politics of higher education in Ohio post-Rhodes, "OSU doesn't have enough power to get everything they want, but they do have the power to block anything they don't want." You saw that clearly in how fast the former UC President was shot down when he called for "multiple flagships." Even Kasich came out and publicly mocked the idea. OSU will never allow the system to go back to anything resembling an "all schools (or even some schools) are equal mentality." And besides, OSU--with the exception of their stockpiling too many high quality kids with their huge freshman classes and branch campuses--isn't the main problem for Ohio. The main problem is the system that Alden helped create where every campus in Ohio has felt free to try and turn themselves into OSU by adding on redundant, lowly ranked and unnecessary graduate and research programs.
I'm not sure how Miami fits in. I guess they could just focus on being the safety school for University of Illinois rejects.