I think this is a tremendously important discussion to have, perhaps the most important one we can have right now. One point I'll make not to counter what you've written above, but to reframe it slightly - is that many of the decisions we make about what needs to scale are cultural (and only narrowly rational).

We've somewhat arbitrarily settled on nation state scale geographic / population scales for governance which (a few less than democratic mega-nations aside), are pretty similar in size and complexity. This is a local maxima, rather than an inevitability. The ideal balance between federalised aspects of governance - which do need to be abstracted to some extent isn't obvious. It's reasonably likely that much smaller micro-states within stronger federalised economies could be more effective. That workplace level democracy can and does increase productivity. That in fact states where the level of consensus decision making is the business, the cooperative and the housing complex, could be more cohesive, less fractious and more stable. Could be more effective if we judge efficacy as best meeting the wellbeing needs of their population.

I'd take issue with the idea that centralisation of decision making is necessitated by having multiple layers of governance. I'd argue a canton style system of carrying forward the decisions and decision making authority of lower houses can also work. Where representation is absolutely essential, sortation can be used to prevent the creation of a distinct political class that is inevitably suborned by capital.

In terms of skin in the game - essentially all forms of consensus (which it's important to point out is radically different in theory and practice from direct democratic voting), require participation as the price of involvement. There is no voting without engagement, in fact in most consensus systems there is no voting at all. Participants become politically sophisticated through their involvement, and their level of involvement inevitably dictates their level of influence. For this to work, groups have to structure themselves such that a lot of the groups effort is spent engaged in decision making. Many of the specifics of the various consensus approaches push proponents of decisions into being responsible for the implementation of those decisions. There's no pretence that people don't affiliate, don't form minimal group paradigm loyalties, aren't selfish, or don't manipulate one another - an understanding of these processes is built into such systems. In fact they what leads to the cohesion that allows consensus to function.

But my key insight here is that many of ills of modern society arise from the idea that things should in fact 'scale'. Climate change and ecocide, the homogenisation of culture, the commodification of everyday life, the alienation that leads to polarisation and sensitisation and ultimately political extremism. All of it's rooted in an appeal to competing in a global scale market economy where goods and services move freely and people do not. Where all nations must grow or stagnate, where legal systems and free trade must be imposed at the barrel of a gun in order to allow the extractive system to continue to expand. This is one possible way for the world to work, in no means inevitable. Societies have existed with radically different affordances and compromises historically.