Silly people! The origins of the NRL are undeniably based from the Sydney RL competition. If you cant accept that then you have some sports history to research.
Of course it is. Thats a statement of history, but it doesnt mean this was the BEST option. A lot of people would argue that this was a f*ck up...
The Broncos, Knights, Raiders, Steelers/Dragons, Cowboys, Warriors have all proven that new teams can be very successful and popular in old markets. The common theme is simply that these "United" teams were about the area being promoted to a higher level.
If, in 1988, the QRL/NSWRL had come together to form an ARL, they could have promoted a few of the best Sydney clubs plus formed a new club or two for the people whose teams weren't promoted.
Instead, we have a comp that (as you point out) has its origins solely in the NSWRL and were are still suffering from that today...