Wow... I think you're right, Shrinkwrap. Take away the plugs!
I admit I am one of those who detests the plugs and cannot use them successfully. For my climate, a peaty plug around a transplant in the ground will worst of all go totally dry due to dessicating wind, and then sucks the life out of the plant.
But I can see how sub-irrigated it could do the opposite and be too wet. I have the same issue with peaty potting mix, they are either too dry or they are too wet, never a happy medium.
I killed a load of seedlings this year with Promix myco... so loaded with damping off, the ones that didn't shuck their seed immediately got cotyledon rot inside the seed.
Hate the stuff... never again!