Except that you still need more escorts/initiative sinks than your opponent, squadroned or not. So, unfortunately, nothing is changed or fixed.
Since you're moving one ship out of the Squadron, you don't really get around initiative sinks... if anything, you exacerbate it because you need to remove escorts from the Squadron in order to get enough sinks to target your enemy... so in the end, you still need more initiative sinks than your opponent, squadrons or not.
I posted this proposal in the 3rd Edition thread, but it didn't seem to get any criticism or comment (Although that may just be that everyone has decided to ignore my ideas, in which case I shall endeavor to make them more eccentric).
Here's a proposal, a mixture of the "Mechwarrior" system and the FAP movement limitations:
Firstly, you must move ships by their Fleet Priority. The higher their priority, the sooner they move. In order from first to last: Armageddon, War, Battle, Raid, Skirmish, Patrol.
In addition, you and your opponent must move ships to create an equivalent number of turns. Essentially, you must move your ships so that you and your opponent move an equal number of ships. If you have 15 and he has 5, you have to move 3 ships for every one of his.
Shooting occurs as normal, and is not modified by this whatsoever.
This system provides the balance of making it so larger fleets can't initiative sink yours; since he has to not only move his higher priority ships first, but move so you both have an equal number of turns, the external "metagamed" benefit of Initiative sinks is removed. However having a larger fleet is still of benefit; lower priority ships will be slightly harder to boresight so long as your opponent also has higher priority ships. In the context of these ship's size and maneuverability, this makes sense.
Larger ships have an easier time fighting Larger Ships, as it should be: No more hiding behind the four Havens in the back of the map.
Larger fleets have a benefit; they're moving more ships for every one of yours, representing their increased maneuverability. However, this increased maneuverability, in this system, doesn't translate to the metagamed ability to translate that maneuver to larger ships. In essence, bringing the tactical nature back to the initiative system, preserving its nature, while removing initiative sinks as a external, metagamed feature that affects other elements of the game, such as Boresight.
Squadrons complicate this slightly. We've removed, in part, the benefit of movement for Squadrons; however, Squadrons provide a different benefit. Representing the increased coordination, if you Squadron ships, it can affect the initiative order of how movement occurs. However, since you have to move ships based on Fleet Priority, a Squadron has to move per the highest priority ship in the Squadron.
An example:
I have 8 ships, my opponent has 5. I create a Pentacon of 5 ships (One ship of which is my highest priority ship, a Mankhat), reducing the number of "ships" I nominate to move down to 4. My opponent now has to move 2 ships to my Pentacon (Which has to move before any other ship in my fleet because of the Priority rule); then he moves 1, I move 1; he moves 1, I move 1; he moves his last, I move my last.
If I use the Pentacon special rule, He essentially moves 2 ships, then another; I move the Pentacon and another ship, etc. You always have to move your ships in such a way that you and your opponent have an equal number of "turns." The Pentacon's benefit is still worthwhile, and Squadrons provide benefits as well.
My examples likely make this sound far more complex than its actual practice and conduct really is.