Ok but see: you keep focusing on PvP as a way to gain merits, which I'm totally against to because it could be easily exploited, because being killed purposelly would mean spend money and there's plenty of metas to gain ludicrous amount of credits in no time. That's already happened with the first undermining, with people pledged to enemy Powers to give their haul just to speed the process. No: we need tasks to complete for your Power, only positive actions should matter, the very moment you give weight to failure people will exploit that, because it's easier to fail and get negative impact than completing the rightful tasks. The only way to contribute should be being pledged to your Power of choice.
Another example: you kill a player pledged to your Power beause you think it's a smart tactic to gank people? Then you're banned from that Power for a month. Enjoy that first gank, smartass, there's not gonna be more.
Another thing I disagree with you is how you see PvP, as something with the "kill" as the natural and decisive event. A game mechanic need a PvE interaction, or if you like it more, a task to complete to measure the effectivness of a player and the team (the Power in this case) he plays for, the PvP factor would be what makes basically impossible (or at least very hard) to complete that task, or on the other hand would make it very easy to do, if the PvPers playing for your team will be able to repel the attackers. You see a Open Only Powerplay as some kind of PvP-driven Gladiator Arena, I see that as a warfare game, with people trying to kill other people or protect some others.
As I wrote up here, nobody wants a gankfest, even if some people will take this as an opportunity to gank people pledged to other Powers, but if you pledge then you admit that you are ok being attacked by differently pledged players, even now there's no more Security response, Powerplay, as already said, is consensual PvP, and it's simply a nonsense that you can be involved in such activities without the "other player" factor.
And yes, network issues will stay. But they are present for other game mechanics: multicrew mining is broken as hell, but nobody's asking for multicrew to be killed as a whole even if it's terribly botched (yeah, that's the reason why I talk about mining so much, I had to try it to help a friend to verify a bug), the fact that instancing is not good in this game is not a enough to justify the open/pvt/solo coexistence in Powerplay. If we follow this stream of consciousness until the end, there's no point at all to have Open Play, because networking sucks.
Of course Powerplay should change by its game mechanics. Look at what I wrote above: no more static triggers but competitive fluid triggers, hotter and safer zones, a PvPer would probably go where there's more "action" leaving the rest of the space relatively safe, because it's there that their expertise would be most appreciated, and they'd be able to fight for other players to complete the tasks required to win, as a team. Powerplay missions/scenarios, so you (and I too for example) could roam around our Power bubble doing missions and finding the variability we seek from this game.
PvP shouldn't be ostracized or relegated to a totally different role, it should be part of the game, find its place in the big picture at least in one single game mechanic, in this particular case as a tool for a Power to make an assault possible, or to rebel an assault while other players protect and secure a territory.
Because it's not a matter of single players engaging their personal playstyle: it's about a mechanic that can give sense to a particular gamestyle, even with all the problems that this could bring with.
Sadly like many other aspects of the game, especially when we talk about networking.
A lot of meat in this post, and too little time to go into detail on my reply. But to sum up the points I keep bringing up:
I don't want to see Powerplay become an abandoned game mechanic like multi-crew, but become fully integrated into the game and attractive to a wide variety of play styles. I think it has a lot of potential, one which is unrealized due to poor execution on the part of Frontier. The primary flaws are in the rules that make fifth column strategies effective, poor communication about how to aid your power, Powerplay Modules, and static fortification goals. (Edit: and a lack of variety in ways of earning merits, of course.
In my opinion, the state of Powerplay in Open is as as good as it will ever get. The players most inclined towards the gameplay opportunities provided by both Open play and Powerplay are already playing Powerplay in Open. Should Powerplay go Open Only, the players who are currently playing Powerplay in other modes will not start playing in Open, they'll quit playing altogether. The players who are not currently playing Powerplay, but start because of it going Open Only, will soon quit because they'll be "required" to play outside their preferred play style. The result will be a new static Powerplay landscape, only instead of a situation where everyone has expanded to fill all available space due to easy fortification, nobody will be able to expand at all because very few people will willing to do the "boring" job of fortification, for reasons ranging from: preferring to PvP; preferring combat in general; no longer having faith that the CAP, which was supposed to be protecting you, because they were off chasing kills; to simply getting frustrated that they're unable to keep very many systems fortified, due to how many underminers there are relative to remaining fortifiers. A Powerplay where there are no border clashes at all is about as interesting as a Powerplay which is a perpetual grind to move the front forward an foot.
The way to create a Powerplay that works for the most players, while simultaneously attracting more players into Open, is to actually reward PvP. Not playerkilling, PvP. As I've mentioned before, it's just as important to reward a player who successfully delivers merits, despite actual player opposition, as it is to reward a PvP kill. Make Open more attractive to players, because its much more efficient to pursues when there's actual player opposition around. The hard part will be making such a system resistant to player collusion.