There are a lot of variables in there. In no particular order:
In the ALC, I think there is actually greater incentives for teams to improve. Finishing 1st is esier and gives you the HFA for the first round. If you have a guy like Skubal, you are likely the favorite.
Settling for a WC could be good or bad. From 2022-24, we had so many fans worried about who we were going to add at the TDL. Why? With little pitching, and most importantly, with no ace, our chances of success were slim. I'd have traded out of our possible playoff slot every year.
IRT teams 'settling', many teams have to. If you have a small revenue stream, I think you have to play a 3-year on/3-year off strategy. If you are a $150M payroll cap team, you should spend three years at $100M, and 3 years at $200M.