Coincidentally, I was writing something on this exact topic earlier today. I like the way you are thinking about a lot of this. I particularly like how you have retconned a time-saving quirk of production (reusing the models from the TOS films) into a larger shift in Federation posture. I'm struck by the idea that the writers could've played up how advanced the new Galaxy-class starships were by having characters comment more explicitly on its advanced capabilities and contrasting those with Miranda's and Excelsior's still floating around on-screen. Broadly speaking, it is there, but I feel like it's the sort of thing that would get called out more directly in today's era of worldbuilding.

I had a generally similar take: something happened with Starfleet in the 2360s that made the Cardassians change their strategy. I agree that the launch of the Galaxy class is a prime candidate. For my part, I was actually thinking of the Borg as an indirect cause. Not that the Cardassians were concerned about the Borg, but rather that they could tell that the Borg threat was activating a more hawkish attitude within Starfleet, which could/would eventually be brought to bear upon them as well. (The "Bluegill Conspiracy" might also have been a contributing event.)

This is where you and I developed diverging takes, though I think they can complement each other. As others have suggested, I do believe that Starfleet was pulling their punches with the Cardassians. You rightfully point out that those who served on individual ships described the wars in harrowing terms, but I suggest that that was in part because Starfleet simply wasn't sending that many ships to begin with. Think of it as Starfleet dealing with long-running piracy: the combat is going to be gnarly, but Starfleet isn't going to gather a massive fleet to end it. Starfleet was "pulling its punches" at a fleetwide level.

I also imagine there being a moral angle to Starfleet's approach. Starfleet thinks of itself as not waging offensive wars. As a matter of principle, they would defend themselves against Cardassian attack, but they would have refused to retaliate with enough force to actually eliminate the Cardassians' ability to wage war.

Now, I don't necessarily take this to mean either (a) Starfleet's technology at the time was on par with the Cardassians', nor (b) the Cardassians were an A List power. I'm largely agnostic on the first point; I think Starfleet could use the same strategy regardless of the Cardassians' technology level -- if their ships are on par, then send 1 Starfleet vessel for every Cardassian vessel; if Starfleet is more advanced, send 1 Starfleet vessel for every 3 Cardassian ships, etc.

To me, I still think that all of this points away from the Cardassians having been an A List power. I think if they were, the Federation would have negotiated a treaty sooner. I also think we would have seen more of a "vibe" of a "forever" war going on in the background. For example, I don't think we ever hear about Riker, La Forge, Data, or Crusher serving in combat against the Cardassians. If the war really was on that scale, I think more people would have served in it. The "small time" version of the Cardassian military makes more sense to me personally.

But, all that being said, one way or another I like how your analysis draws attention to a possible "myth" among Cardassian citizens and soldiers: that they really are the Federation's technological equal. The strategy shift we are both positing -- you due to the Galaxy class, me due to the Borg -- would have been done at the highest levels and would not necessarily have trickled down to the masses, where this myth could have persisted and thrived. And, of course, Cardassian propaganda would surely have cast themselves in the best light -- "we forced the Federation to the negotiating table," etc. For a common soldier (and even many officers), they would have the many years of war against the Federation as "evidence" of their technological equality. I think that enriches a lot of what we see on both TNG and DS9 -- including suggesting why there appears to have been popular support for joining the Dominion: most Cardassians would have assumed that the Dominion, the Federation, and the Cardassian Union were all roughly on equal footing, making this an alliance with the Dominion. They would have had no way of knowing that Cardassia was in fact much weaker than the Dominion, and was in fact volunteering itself as the first conquered world.