"Sooooo....let me get this straight....if every team were like the yankees and could up the bidding for free agents like Arod, then salaries would actually go down?"

Bidding for players like Arod take place because there is not enough revenue in small markets to allow a team to retain top players.
Salaries would not go down they would stabilize as teams like Seattle that want to be profitable would not have to trade Griffeys and Arods . Revenue sharing and salary caps have a similar effect and are a more realistic way to achieve competitive parity. The Yankess or any high salary team still have to play the game just like any other team. Any fan of baseball cannot deny the history of the franchise like them or not.