Yup. With a limited free agent market, it makes star players more valuable, being that there are only sixteen teams training players. Which also means that the stars that DO exist will have legacies of their own which adds to the immersiveness of the BB experience. That's missing right now because, unless you're in a top division in an active country/region, there is always a player available on the TL to make your team better. Especially if you're not imposing self restrictions, like me, with only buying USA players.
Like you said, a concern in a promotionless system is inactivity. But I do believe that playing with the same people and developing rivalries would keep even the non playoff teams interested. Another thing you could do is give new managers control of an inactive team as is, instead of an entirely new one. In a one league system it would be bad if an entire team goes into free agency when a new manager joins the game. The best teams would just pick up the good players and become even more dominant, leaving the new guy and the bottom teams screwed for a long time, which will result in more inactivity.
I think sixteen teams is fine. I'd rather have more seasons to play through.