I think when you look at the general standard of football in the UEFA confederation it's pretty strong outside of about 3-4 sides, so creating a mini-league with them and some of the others does a disservice to a lot of the pot 5 and 4 teams who are really too good for that sort of treatment
Plus, we've seen a general improvement in the likes of Georgia, Luxembourg, Malta, Faroe Islands etc over the years, to the point that they've all managed to get decent results against the likes of Italy and France, either getting a point or losing narrowly. Luxembourg went to France and held the French not too long ago for instance, whilst Malta almost beat Italy at home before losing 1-0 in a brave effort
To exclude teams like that doesn't help them but only makes it even less likely that they can kick on. You need to play the best sides in order to improve your own game. Pot 5 and 4 teams are only going to improve over the next few years, and there's every chance that some of the pot 6 sides could do so eventually as well
UEFA has a better standard of football across 50 sides than it's ever had previously, which shows to me that the current format is working. Armenia almost made a playoff place for instance, whilst North Macedonia continue to get good results. Finland have kicked on a lot as well over the past 20 or so years, not to mention Iceland achieving what they have done in the past decade after being whipping boys for years
The current system works. For all we know Liechtenstein could be the new Iceland in the next couple of decades