As a skier for a team that is constantly flipping between D1 and D2 from year to year, I would much rather go D1 every time, because in my mind I'd rather lose to some of the best skiers in the world than win against teams that have no chance at coming close to us. Unfortunately this is not the mindset of everyone on teams like this. On the subject of funding, some school's club sports organizations reward teams based on the number of events they win or tournaments they place highly at blindly, we can tell them that we lost to the winningest team in all of college sports, but it doesn't mean anything to them, their guidelines reward successes. We would never EVER dream of sandbagging for this reason, we are all out there to ski our best; we went D1 last year and wanted to go D1 this year, but being unable to practice at our home site for the entire season because of flooding, that becomes much harder. Aspirations aside, what all of that means money wise is that us having a power year and finishing low in D1 can result in less funding or priority with our overseers than us having a less successful year and winning or finishing high in D2. Funds are crucial to a team like us that brings upwards of 50 skiers to the conference tournament, most of whom have never been to a tournament before, and have to pull between 50 and 75 skiers for practice weekly at the home site.
addendum: I can't say for certain, but I'd be willing to bet the administrations of power schools care about whether their teams win nationals, and may adjust funding/support appropriately. It's no different for us, just with orders of magnitude less money/support. And that's what a 3 division nationals would do in my mind, more accurately separate competitive groups. I sort of envision it ending up as the power schools, the highly competitive club schools, and the beginning teams/building year teams.