Keep in mind that (unless the rules changed for 2012) if you put Cat 5s in a race, you're limited to 75 racers. (Cat 5s alone are limited to 50 racers). Any Cat blank-blank-5 race automatically has a field limit of 75.
I think that Masters races ought to be treated like Cat 3 races for upgrade purposes. I suppose with the new ranking system it'll be more accurate, but there are many, many Cat 3 Masters that ought to be Cat 2s. Upgrading them would limit them from picking on the hapless Cat 3s after sweeping a Masters race or two.
What this would do is force really good Cat 3 Masters to upgrade to Cat 2. Former Olympians shouldn't be Cat 3s, nor should current national champions.
I've raced in Cat 3 races with three current national crit champions in various age grades. I think that's not fair, but that's the way it gets handled for good Masters racers. One won the 45+, got second the 35+, and won the 3s. And he was disappointed to have lost the 35+. He's one of the guys who has multiple national championships (in crit and on the track) yet he's been a 3 forever (20 years?).
(On a side note I think any national champion should immediately be upgraded to Cat 2 minimum).
I think some compromise would work, similar to women racing lower category races. A woman has a 10 year adjustment on age and 1-2 categories for Category. A Cat 1 woman can race Cat 3 mens, and a 35 year old woman can race in the M45+ race.
With similar adjustments maybe a 50+ Cat 2 can do maybe a Cat 3 race but a 35+ Cat 2 can't.
I know that I can hold my own with 55+ racers that are pretty good (recent national champs), but the 45+ kill it. 35+ are stupid fast.