The prep school thing is becoming a larger problem in basketball for sure, but I posted the article earlier about Biff Poggis program basically taking all the best kids from Baltimore and running roughshod over the state.
I'm not sure what the answer is, because you are right there are lots of small, lousy private schools. But there are a handful of elite (athletically) private schools that might as well be college teams.
That La Lumiere school in Indiana brought in so many transfers the other year that they ran out a starting lineup of 5 kids from 5 different states, each of whom had been the highest rated recruit in their state the year prior. It was like Jaren Jackson from IN, Brian Bowen from MI, Jordan Poole from WI, Tyger Campbell from TN, and I forget the 5th.
Pennsylvania put in a rule this year to address it. Basically if you take on a certain number of transfers you enter a program where you accumulate points based on on field/court performance. If you reach a certain threshold of points, they move you up a class.
I love discussing this because it's a fascination question of one size fits all-ism.
So you mention La Lumiere. They're in a totally different world than say Cathedral, a Indianapolis power a few hours away that routinely recruits monster teams. La Lumiere doesn't even compete in a sanctioned league. They just play other weird private schools and national events. So they're not denying a public school anything. Cathedral plays monster schedules, and then rips off ridiculous playoff runs against worse competition (they won three consecutive state titles with five-loss teams), or did til their bump-up rule caught up with them.
There's also the fascinating state dynamics. In Indiana, private school football dominance is a real issue. In Georgia it was so bad on the small school level, they had a split, but the bigger ones haven't been a thing. One state over, South Carolina has a private school league because all but 3-4 teams couldn't come close to competing with public schools. In California, private schools dominate the top rungs of the sport, there's plenty of awesome public schools competing. It looks like IMG likewise doesn't play for anything other than just the games it plays, so if someone wants to face them, I guess have at.
I've often thought about what a split would mean, and I guess I come to the conclusion a lot of the country don't have the density of those powerhouses to be feasible. Like in California, De La Salle for a long time just crushed everyone. And if it only played private schools in its section, it would be double the size of the next closest school and just be murdering even smaller schools. I don't know if that outcome if better (ironically, a section over, there is a parochial league, though it's still in the same playoff). I like different places trying out different approaches to it.
(That's to say nothing of non-football/basketball dominance. A friend told me about the biggest private school in South Carolina, which has like a million state titles. I think three are in big sports. But with folks with money, you can do damage in country club sports/sports with a big club element, plus you have the support for a hyper organized track team)