Bit off topic but my lad is at Saints and a close friend is on the board there.
Basically they’ve gone for a cultural shift led by a new principal - much more aligned with the first option you mention. The arms race as you call it is well and truly dead.
Why would you turn yourself inside out worrying about a school across the road when there’s a whole world out there to engage - well that’s kind of the theme anyway.
A noble suggestion, but the reality is they will continue to get thumped on the sports field if thats the path they choose. It wasn't that long ago (2011 or 12 I think) that St. Peter's went through a footy season where they lost 6 games in a row by more than 25 goals....There was talk then of the school making a decision to enter in Div 2 competition (effectively to play against Scotch, Westminster, Immanuel etc... and avoid PAC, Sacred Heart & Rostrevor). They didn't because parents and old scholars kicked up a stink and pressured the Head to make changes and to invest in the sport.
Their last 'successful' season (as in winning their Intercol against PAC) was in 2013. I think it had been at least 10 years prior to this for the previous win as well. The 2013 win came on the back of having a unique set of circumstances - they had 3 Yr 13's in the side + 3 boys that would end up on AFL lists - Matt Allen, Riley Knight and Mitch Harvey. All 3 of those were on scholarships of one form or another.
Will be interesting to see what happens when they get thumped year after year and the old scholars start getting agitated again.
FWIW from what I have heard the school is a war zone at the moment. The new Head is a $$$ making machine and is ramping up class sizes and cutting subject choices. He's all about buildings and grounds and has zero interest in education or the boys. Again an odd tactic and will be interesting to see what happens when parents start to realise that in terms of education, they would have been better saving their $$$ and sending their kids to other schools.