The problem isn't the 2 tiers, it's RL/Crouption really.
Kal's fought people 2 tiers below him I believe, but they always state "No redeaming light" in the stipulations. Very few people are willing to be forced to swich paths.
I would say number 4 would get my vote, I think... I assume that if someone used Mind Thief/Right of Domain, the person they used it on would not lose the location/style.
Here's an idea...
MT/RoD can only be used if the light/dark fighter won the match, then a extra round is called for. If the light/dark fighter wins that round then MT/RoD kicks in and they get a sig style/location from the person beat. If however they lose the round, then then person beat doesn't lose rank for the loss of the match. This would give someone incentive to give the extra round a swing, as they might negate the loss of rank they're going to suffer for losing.