Really nice to see that you are moving to the right direction with your thinking! But there was still a little bit of misunderstanding in your proposal.

I like that they have removed the EOS Core Arbitration Forum (ECAF) as the sole centralized arbitrator and replaced them with a free market arbitration system.

They didn't replace ECAF with another system, they removed base-layer arbitration completely and created the official way to use app-level arbitration. These are two completely different things. Base-layer arbitration means the arbitration of constitutional disputes. With EOS NY's proposal, this would be in the hands of BPs.

I see it as a step backwards. When the stakes are high, it's usually a good idea to decentralize the system and create several independent institutions to run the system. In this case, the model EOS uses resembles what countries are doing (at least some of them). They separate different powers: legislative (in EOS, voters through referendums), executive (BPs), and judicial (ECAF). With EOS NY's proposal, ECAF will be removed and its powers are given to BPs.

ECAF was conceived as an arbitration forum, yet it oversteps the remit for what arbitration is and as yet, ECAF has not declared or clearly defined a scope for its organisation.

I'm not sure how ECAF could do any of this. The scope of disputes is defined by the community. It's the community which sets the rules, not ECAF. ECAF doesn't have any say in the constitution, and it really shouldn't. That's the job for the community. ECAF will only resolve the conflicts that the community asks it to resolve. The constitution is the scope.

If you don't like that ECAF is handling certain cases, you can't ask them to drop them. You need to ask the community to amend the constitution so that those cases of dispute are not possible to arise from the constitution anymore.

ECAF has also proved that it takes an incredibly long time to reach conclusions and issue orders. Whilst this is good for arbitration (we want to make sure they take adequate time to access each case), it is not a good process for carrying out actions that need to happen quickly (such as removing bad actors from the system). Block Producers are probably in a better positioned and better equipped to assess and make decisions that require swift implementation.

BPs can do emergency actions also in the current system. They just need to file a case after that, so that ECAF can verify if the action was rightful or not.

If ECAF were to reduce and define their scope as an independent body that only policed and enforced against non-compliant block producers (i.e. became a completely different organisation), then I would be willing to take a look at that as a viable role for them.

Again, if you want to reduce and/or define the scope of ECAF, you can't ask ECAF to do it for itself. You need to ask it from the community, because it's the community which writes its own rules.