I have been involved with a club that a few years ago was weak in 2 age groups. Because of this, the majority of parents of children entering these agegroups wanted the club to enter these teams in div2, so they would be reasonably competitive. However, players who were going into their 2nd year,(and who had played div 1 previously) threatened to leave the club if they had to play div 2.
IMO, if a relegation system were adopted, good players in a weaker club would leave to play div 1 in another club. Hence, weaker clubs would become weaker, and they would not be attractive to new players. All the references to situations in Melbourne and other sporting pursuits, are misguided when compared to basketball in SA because of the small amount of teams & players we have . We should look first at ways of keeping junior players aligned to the club in their area, as player movement almost always hurts the smaller clubs.
Also, BSA would have to change its regulations because all member clubs are supposed to field div 1 teams.