We had the same problem here in Nebraska. One year we had 69 lifters at the state meet and there were 71 Gold medals, a few silver and only 1-2 bronze. I felt the same as you about this, too many divisions.
What I did was create a meet with the Open only format to allow for better competition. The meet is "Midwest Senior States". The meet is in it's 7th year and is the most competitive meet in the region. To win your weight class you need to put up some numbers, no free trophy at this meet. The response from the lifters has been great. Only a few lifters avoid the meet and those are the trophy hunters that are afraid of competiton.
We've had master, teen, and open lifters all competing against each other in thier weight class and alot of times the meet goes down to the final deadlift, which makes for an exciting meet.
I run the event with the same caliber as a National event. I hold it in Hotel Ballrooms with a raised stage, chrome Ivanko, and large computer scoreboards.
In the beginning some thought the idea would not work, but the meet has become the premier event in the region. The meet is open to all age lifters from all states. The meet is held in the Omaha metro area, but we get lifters from, IA, SD, KS, MO, IL, and even MN.
The only negative is the Nebraska State meet has almost completely died. this year it only had around 2 adult lifters and around 25 Teen lifters. But I'm not sure the poor state meet turnout is related to the Midwest Senior States meet.
I would encourage you to push the issue to get your state championships changed. Give awards 1-5 and give out more presitgous awards, because there will be far less 1st place awards. The event will be a much better event in the long run.