If they do this then it will basically kill their national teams. Say there is a league made of 4 Scots, 6 Welsh and 6 Irish. The Scots all do well and finish in the top 4 then they will have the last 4 picks in the draft. So the the Welsh and Irish get the best picks while Scotland get the leftovers. If this happens for a couple seasons then the Scottish national team could will be effectively dead.
Good point. That's why we have to consider having joint national teams (but with their original flags presented).
NTs in their current form, i think, not only for the reasons you mention, will probably suffer.
With joint league NTs:
In your example it would be NTs with Welsh, Irish and Scottish players. The possibility of getting late picks if there are only 4 players from Scotland, and all of them finish on top is present, but that does not necessarily mean that you don't get to have players on the NT. 6 Welsh and 6 Irish managers training 2 players each would still only be 12 players, some young for the U21, and som older for the NTs. If the 4 Scottish teams finish on top of the league every season you might start to see less Scottish players on the NTs. But I think you are blowing things up, and maybe underestimating your opponents.
I had another stance on this subject, but I see the implications. For the communities sake, I would like to see the original flags in league, and a new flag displayed only on the U21/NT page and when looking at the national team roster (going to the original player page would display original country flag, but mention that they are playing in the groups NT).