Its not that no one thinks FFP rules won't be applied, the RULES have been applied already, there is absolutely no official information on the PUNISHMENTS for breaking the rules... this is where the latitude is. The rules were made a couple of years before they even thought about the punishments. THis is the point, the punishments will end up being a cash making device, you can make £30mil being in the champs league, you broke the rules badly, we're going to charge you £25mil to stay in the competition, so you can still make money, we make money, everyones happy.
Also the problem with your situation is, City get thrown out of the champs league... this is because they'd be spending more money than they have, none of that leads to the other teams having more disposable money, at all. City have blown half a billion in a few years, they've only made maybe £20mil off extra champs league money.
Being in or out of the champions league has zero effect on City's ability to spend, none at all.
Also, again, no one knows what the punishments will end up being.
I'm also not sure what you mean about the championship rules, its a case of if a club is making a 1million loss, they get fined a percentage, if you spend 5mil more the percentage increases disporportionately, the more you spend, the bigger the fine gets. This is almost certainly how both prem league and champs league punishments will actually end up being.
If some small team from Belgium gets into the champs league but went 1 mil over allowable losses, minor fine, if City go 70million over the allowable spending, they get fined HUGE.
There is no reason to exclude teams from the champions league, why, because Uefa would merely be weakening the champions league, leaving less desireable fixtures to see on tv, and less interest means less profit. You think if Utd, Real, Barca and Bayern all broke the rules Uefa would exclude all the most watched teams in the competition... shooting themselves in the foot by decreasing tv audiences and advertising money? Uefa do something to reduce their own profits, seriously..... this is why no one believes the punishments will be serious.