5. It could be extended with slot-tags; that is, tagging certain Pokémon as consuming 2, 3 slots of your team. This would make them be automatically favoured by the system (as this is a huge handicap), allowing some pokémon (eg. Mewtwo) to actually be stronger (which is cool and natural), without giving the player who uses them an advantage.
To me, this sounds like it would be a little unbalanced. An decent sweeper alone on a team could be extremely overpowered if it was the only one on the team or something, or even if it was 3 pokemon taking up 2 spaces each. They would be more powerful than normal and would be much more capable of devastating another team, despite level differences.
Still, the idea seems sound.