Wouldn't it make sense to simply reduce aero? Less aero and more mechanical grip = closer racing?
I'm assuming though that teams would hate the current advantage their superior aero gives them over the smaller teams.
Yes it would. They could allow some partial ground effects to increase mechanical grip (as other series have), but the FIA seem to be dead against it as it was something they got rid of when trying to slow cars down, and it was a contributing factor to Senna's death. They don't want to countenance it, even though I would point to the poor protection around the barrier Senna hit rather than the fact he came off the track when his suspension bottomed out (due to cold tyres) and cancelled his ground effects and thus a lot of his downforce keeping him in the high speed bend.
The problem is that all the teams wanted more aero as they saw that as a way to circumvent Mercedes engine advantage. Now that's bitten them in the butt as Mercedes have added great aero to their car in addition to their engine advantages, which in turn has increased the Mercedes downforce and allowed them to put even more power onto the track. Those changes have IMO gone in the wrong direction, as we want cars to be able to get close and over take each other, and increased aero stops that. We've even seen teams design cars to deliberately generate dirty air for the car behind, and now savvy drivers like Hamilton are using it as a weapon to win races. Why hare off into the distance and stress your engine, when you can keep your competitor close behind, overheat his engine and brakes, wear his tyres out faster thus ensuring he can't come back at you?
Ferrari only caught up due to them adopting a Mercedes style engine, and exploiting the Haas loophole to build a new aero model for their car far beyond the limitations of the rules for CFD and wind tunnel use.