But is the ideal adding a new rotating format (Extended) or a new nonrotating format (Frontier)? I think all of your bullet points apply equally to both.

I can see merits to either Extended or Frontier and probably space for both.

Frontier will eventually get just as big as Modern is now - will we then need another non-rotating format at another arbitrary cut-off point? A rotating format larger than Standard seems like a more permanent solution at first, but you're actually just changing where the gap lies. Will the player base grow fast enough to warrant the segmentation caused by additional formats?

I completely agree with the OP.

Barring aggressive reprints, Frontier will end up like Modern in 10 years time.

Extended would allow people to play their cards for a period of time but would prevent the format from becoming "solved", which would have the side effect of having a smaller banned list.

Wizards would still be able to profit off of people buying new cards as no deck would stick around forever.

My thought would be to go back six years and rotate out a block at a time. So when the first set of a new block is released, rotate out the oldest block(and any core set released prior to said block). Or just rotate out one block a year(considering their new release schedule). If they brought back Extended next year start out with Core 2012.

They will eventually bring back a new rotating format, but that won't be for another 5 years.

Pretty much. It will take 4,9 years instead !