I was not in attendance and don't believe I've ever raced with most of the people involved but I can lend some insight I have gained in my nearly two years of experience as a "race director" here on GTP. I've run into several of the problems you encountered, some I've found ways to work around, some I haven't.
First, it seems like the more rules you try to make the less people want to pay attention to them. The more you expect from them, the more you'll be disappointed, unfortunately. I've always tried to keep things simple, not expect too much from the members, and let the game handle as much as possible and that seems to have worked well. (We've also been doing "tuning prohibited" racing for quite a while with mostly positive results).
Heavy damage, it's been my experience that it usually hurts the victim as much or more than the offender. Best to leave it on medium, not as big a penalty to the offender but at least the victim's race is less likely to be ruined. Yeah, it's not as realistic but most people aren't professionally trained drivers with years of experience behind the wheel either.
Try using a private lounge instead, i.e. create a PSN ID: Stock Club and only "proven clean racers" will get added to the friends list. You could have tryouts in public rooms and only send invites to the people who prove to be clean and courteous. Also, if someone becomes a problem you can kick them off the friends list so they can't race anymore. An added benefit, all the members only have to send one FR to one ID, but they can then race with all the members without needing a steward and not having to worry about Randoms.
Limit the number of people in the room to 13 or 14. If you get 15 or 16 people in a room you're almost guaranteed to have lag, PD has even admitted to such. I've found 12-13 to really be the useable limit, once 14 people are on the track cars start to shimmy and shake.
Hopefully Stock Club will get another go, this was the first event and maybe people were just too excited to finally race together and their eagerness got the better of them. Sometimes it takes a few races for a group to get familiar with each other and find their groove. There is a wide spectrum of skill level even on a forum dedicated to the game, 100% contact free racing is almost impossible to create but forming a solid group of drivers who are dedicated to being serious and gentlemanly is definitely possible with a little work.