Yes, top six is a benchmark, but if you cannot compete it wouldn't really help momentum. A season in challenge cup could be used to give some of the up and coming players European experience.
The challenge cup would help younger players in the same way that a season in the championship would.
Both would allow younger / academy players more game time
However the clubs all want the money from the higher tier competition.
"Settling" for challenge cup could also be seen as a lack of ambition.
However, my initial point is that even with ring fencing, there are significant rewards to be obtained by finishing higher in the league, so I'm not convinced too many extra academy players would be "risked" because of it