Some of the incentive problems would be mitigated by changing the funding structure, to not be a single pool that both ECC and Zfnd compete for.
Instead, earmark the funds to the intended recipient (say 10%+10% as in @aristarchus’s 20% split between the ECC and the Foundation proposal). However, still subject the dispensing of funds to 2-out-of-3 approval. Any funds yet to be dispensed stay earmarked to the intended recipient for the 4 years until the 2024 halving, but are not irrevocably owned by them. A community decision process in 2024 may decide to reallocate remaining reserves.
The main advantage is that this avoids the zero-sum game and the urgency for each funded party to spend funds before the other takes them (the first incentive problem). It also reduces pressure to consume reserves (the third incentive problem), though does not eliminate it since reserves may eventually be allocated.
This also caps the damage if one of the funded parties goes rogue and somehow manages to receive its funds and then waste them. The other half of the Dev Fund would remain earmarked to the other funded party, so substantial work can still happen.
This also maintains the intended an oversight structure, allowing for enforcement of reporting requirements such as those suggested by @prestwich and in the Foundation’s guidance.
The main drawback, compared to the original proposal, is less flexibility. If one of the funded party puts all of its portion to good use, and the other one underutilizies its funds, it would require the consent of the latter to pass on more funds to the former. Also, this does not allow for direct funding of other entities; though indirect funding is still possible, e.g., via the Zcash Foundation’s Grant Program (using its own share of the Dev Fund).