I think the prospects of there being an Anglo-Welsh league is a direct result of the HC wrangling. The new league would probably be an alternative to European rugby, not as well as.
We would make up room and then some by having a 16-team league instead of the HC and LV. Season needs shortening anyway.
I really like the idea. Even more so than European rugby. It would be way more competitive. (The French have too much money, and the Irish have a lot of their wage bill paid by the IRFU, and those resources just suffocate the competition. An English/Welsh league would be competitive.)
EDIT: as for a reserve tournament, there is a really poorly resourced reserve tournament that runs during the first half of the season currently. I'd like to see that given a makeover into a cup competition, and for it to run midweek, forcing teams to pick second team players.