I don't get this club vs country BS to be honest. If the big clubs had a choice they would always invest on homegrown talent. I mean, the list of advantages on that are obvious. These players tend to stick around with the club more, there is little adaptation risks and they understand the game style and what is expected out of them. No wonder why clubs like United had spent ridiculous amounts of money on local teenagers and English players despite being fully aware that they don't represent value for money.
Also by weakening the big clubs through restrictions, there's no guarantee that that would translate in better players for the national team. The Serie A is in shambles but that hasn't boosted their national team but has actually made it worse as clubs are cutting off expenses by not employing expensive personnel (ie quality managers and youth staff), trimming their youth academies and opting for loaned players whose salary is heavily subsidised by the parent club (ex Torres). Such thing had a devastating effect on smaller clubs who had always relied on producing and selling youth talent as there are few buyers around.
I think that the first thing the FA should ask if player's talent is really the most pressing issue here. I mean take England during the WC. It was outclassed by Italy who are a mess at the moment and then it lost against Uruguay and drew against Costa Rica. With all due respect but while one has to respect nations who had produced great talent such as Suarez, they really aren't at England's level in terms of quality players. Which brings us to ask the next question. What had England achieved when it had some real talent. A bit more then a decade ago Manchester United went on to win the treble. Liverpool and Chelsea followed the lead by winning the CL and Arsenal went close by reaching the finals. Surely the amount of foreigners in their team helped, however what had England achieved with the likes of Scholes, Beckham, Lampard, Gerrard, Owen, Rio, Rooney and Sol Campbell (hence I would probably be called a racist by him)? We all know the answer. So one must really ask if these no shows and erosion in talent is down the fact that England lack of quality coaches at all possible levels.
Another thing which worries me is that football takes two different routes in England. There's the ones who play continental football because that's the only way to thrive in the CL and others who simply don't care about that and play a style of play which is completely unacceptable on a continental level. The FA is guilty for that for allowing referees to close an eye to the physicality of the English game knowing that it is appreciated by the masses. Now tell me, how can anyone ever hope of building a solid national team when a substantial number of clubs produce players who would be more suited for rugby then to teams like Manchester United and Barcelona? How can you ever hope that clubs like United would pay real money for youth talent when such youth talent simply do not exist? No wonder why barely any English youth talent is 'poached' by foreign clubs. This talent are either at fairly rich clubs who have no need to sell or else are busy learning how to knock players out or head the ball from crosses and long balls.
Not to forget that many mid term/small term clubs in Spain/Italy/Germany produce quality youth talent because they have to. They simply lack the funds to get quality players from abroad and often rely on selling their best players to the top clubs to balance the books. In England that simply does not happen. Even the smaller EPL clubs can resist any bids for their own players and can get decent players from abroad.
I think that a holistic approach need to be taken where the focus need to be of producing as many quality talent possible with the right skills to play anywhere (top clubs in England, Germany, France, Spain, the Netherlands etc) and give them their first step in the EPL. There should also be rules that allow more movement for youth talent as long as the 'seller' club get compensated adequately. Football at all levels need to be harmonized around continental football in such a way that a kid from lets say Stoke can move at United without looking too much out of place.