If you want all the higher/middle rated players on teams and all the lower rated players as free agents then you might as well just get rid of the salary cap.
Back in #mlut they did some drafts where they just drafted every single player to teams. No salary cap, no free agents. It worked out just fine. If you combine that with your captain drafting system it could work out. Just some old ideas that might could be used in future drafts.
This system seems pretty cool, good luck
.