The instanced thing might work if it was level dependent. I wouldn't mind flying through a PVP sector space zone, if I didn't have to worry about some LG coming along and blowing my Lt Com ship up.
I don't even like PvP as an Lt Com 2, you end up with people 8 lvls above you. The ten level range is actually pretty big, but if you put that kind of thing in a sector zone space people won't take long to quit using it. Then you have a bunch of people complaing and wanting changes made.
Most PvP in this game would be better if people took the time to try and teach new players the ropes, instead they go in and fire red phasers, blue beams and green blasters then empty all tubes on them. Sit back, watch them die and smile. They never try to help them learn the ropes to be a better player, and honestly many can't figure these little things out on their own. It's a sad thing to say, but it's a fact.
This would just aggrevate that even more. Some guy just flying along, not realizing he was in danger...and bam, dead. Only has to happen a few times to become annoying and have them quit. Not really what we want to happen I think.
Also, what if a couple of KDF players are teamed up, one decides to attack some unsuspecting Fed. 2vs1 isn't gonna be fun. What's to stop that kind of thing.
I wouldn't mind seeing some open world PvP zone, but there is a lot to consider more than just "turn it on".
The problem is that when you see these rainbow builds and say "Hey.. maybe you should take a look at your build, you could be doing more healing/dmg.. just ask if there's anything you wonder.." (example :p ) people see that as an insult