Nice hypothetical exercise going on here. We all know none of this would ever happen.
If it were ever to become a serious exercise, it would be impossible to simply remove some existing teams. The only way to do it would be to create 12 new teams.
Something like:
WA x 2 - Freo Dockers and Northern WA Nuffies
SA x 2 - Adelaide and SA Country
Qld x 1 - Queensland Queens
NSW x 1 - Sydney Slops
Nt x 1 - NT Crocodiles
Tas x 1 - Tassie Tigers
Vic x 4 - Melbourne Central, Greater Geelong Area, Gippsland Power, Northern Victoria
Thats a 22 game season. Throw in a Kiwi team if you want for a 24 games season - top six in finals either way which would shorten the finals series by a week.
The numbers of teams for each state is based on population generally and population of footballers.
Draft would be adjusted, so that you grow and develop your own talent via acadamies and minor leagues and you get the only crack at the best three each year in your zone, then the rest go into a free for all draft with lower placed teams getting the first picks.
Raising the draft age to 21 would even out the talent pool and create some genuine interest in the lower leagues.