Neither is perfect, but both are trying hard to provide a positive soccer experience for our kids. Such a behemoth would inevitably be more difficult to manage. More importantly, IMHO, competition is what makes America great.
Soccer is no different.
C.S. needs two healthy clubs to provide competition for one another. It provides an inherent system of checks and balances between the clubs to help promote high quality and good customer service. While the notion that C.S. could field stronger teams is somewhat valid, I don't think you can automatically assume that combining two P2 teams would automatically yield a P1 plus a Classic team. Certainly, that's a possibility, but you may just end up with 2 different P2 teams within the same club. Dominating at P1 seems to require more than just raw talent.