Senser81
VSN Poster of the Year
In his Historical Baseball Abstract, Bill James makes a pretty convincing argument that baseball could easily support something like 100 major league teams, and the idea that expansion greatly dilutes talent is flawed.
You kind of touched upon this in your post, but I think the difference is that when baseball expands the greatest dilution occurs with the pitching...add enough teams, and you have #3 starters becoming #1 starters and guys who would be relegated to pitching a few innings from the bullpen are elevated to regular starting positions. But the outcome of this is more runs scored, which evidently is what the baseball powers want.
Its the opposite in football. When football expands the greatest dilution occurs with the quarterbacking...which leads to fewer points scored on average, which evidently is what the football powers don't want.