I think that your statement is credible as well that the norms of a Rajasuya and Ashwamedha yagna changed b/w the Treta & Dwapar Yugas. In the former, a Rajasuya yagna necessarily implied an initiation of hostilities by the ruler undertaking such a campaign, which is why Bharat was against it. In the latter, a Rajasuya yagna probably gave kingdoms the graceful alternative of allying w/ the ruler seeking the sacrifice, which meant that not only would Krishna, Shalya, Drupada et al have accepted it, but even unrelated kingdoms, like Chedi, Matsya, Srinjaya, Kekaya, et al would have taken that up.
In case of the Ashwamedha yagna too, I think that the ruler undertaking this sacrifice had the option of selecting his allies, and exempting family members from subservient roles. In Rama's yagna, Shatrughan, in spite of being the ruler of independent Mathura, was a co-host. (Incidentally, as I had argued in the past in the Ramayan forum, Shatrughan couldn't have accompanied that horse, since he was an independent ruler, and as per Valmiki, it was Lakshman, who accompanied the horse and was unchallenged throughout, and no, there was no battle w/ Luv or Kush) as were Janaka and Kushadvaj, as well as Yudhajit of Kekaya.
But in Yudhisthir's Ashwamedha Yagna, it seems that that was not an option for rulers. Otherwise, Babruvahana should have been invited as an honorary guest or co-host b4 the horse entered his territory. In fact, he was only too happy to welcome Arjun and accept Yudhisthir's overlordship, but Arjun's expressions of disgust @ his behavior forced him to do battle. Which is really strange, b'cos while Babruvahana was recognized as belonging to his mom's maayka instead of sasural, he could still have been recognized as a relative of the Pandavas and accordingly honored. Yeah, that did happen after his victory, but aside from the pre-destined curse of the Vasus, this confrontation seemed needless.
Another thing - I recall reading that if an Ashwamedha Yagna was successfully stopped, then it was the duty of the ruler who succeeded in stopping it to undertake the yagna himself. In which context, the stories of K-L successfully stopping the horse look ridiculous, and as far as Babruvahana goes, it would seem that he should have then taken up the yagna, and Yudhisthir and others should have recognized his overlordship. Except that Babruvahana wasn't known to have had any heroic sons or brothers or generals who could have successfully accompanied the horse.
But back to the discussion on the Kaurava challenge, you are right that Yudhisthir wouldn't have challenged Dhritarashtra, but had Dhritarashtra challenged Yudhisthir, then what? I doubt that the Pandavas would have had the option to back out w/o a loss of face, and even if they did, Karna could still have allied w/ some other enemy kingdoms and trounced them. I do think your observations about his prowess as a warrior is interesting, and I do agree that he was very overrated as a warrior. But that's another discussion, and probably the next thing we'll get to after this.