You can add more weight divisions and fighters will still cut the extreme. You will have some guys who can will become "too small" for 175 so they will cut to 165 and the issues will continue. The root problem is that fighters will continue to try and game the system for an advantage anyway possible. They should either the hydration tests, certify weights like wrestling, or institute a policy where you can only be so much over the weight. For example, if you fight at 155/LW you cannot weigh more than 171lb on the night of the fight which is the limit for WW.
I know fighters who weigh in at 155 but come into the fight at 185lbs which is 2 weight classes above what they weighed at.