Yes, I do think that we need this big of a military. I am uncomfortable by how low it's been suggested that we draw down our forces. But I would also submit that we don't necessarily need this much capability in a standing, active duty force either.

As an example, I submit the UK. Their stated defense strategy for their interest in the Falklands is that Argentina is in no position to make a move. Thats it. Should Argentina secure outside sponsorship (as was a common occurrence during the cold war), the UK could do little more than smile and wave this time around.

I also agree with your suggestion that much of our readiness training could move to simulation based methods. That simulation based approach would have to be supplemented with more robust realistic evaluation methods, a-la Red Flag. A potential downside to this approach, if you and I are wrong in some of our assumptions, is the potential for increased mishap rates during the reduced in-flight training times and exercises.