There is no reason no retro-squad needs to lead to bigger queue's on the actually decent rides. There are plenty of other options the park can do that would probably cost less than what they are paying to have the silly fairground tat. Examples of the sorts of things they could do:
- Run Galactica with three trains. two stations at all times
I'm sure they'd love to. Take staff absences or technical issues into consideration, however, and this is not necessarily possible.
- Put a cheap attraction in the Oblivion shop - could be something as simple as a mirror maze but they could actually theme it to X-sector. A ministry of joy test or something like that, there's plenty of cheap and easy options.
This isn't feasible for a number of reasons. Whilst Oblivion's capacity is nowhere near where it ought to be, a mirror maze would bottle neck the exit. From a marketing perspective, Thorpe had to bolt an IP onto their mirror maze for any degree of success. A mirror maze is nowhere near as marketable nor as satisfying to the guest experience unless a good chunk of cash is thrown at it.
- Have that Mack VR experience somewhere but make it free
VR experiences cost money to produce, and the equipment costs money to rent. Even using stock films like they're doing at the moment, but taking away the upcharge element, is not a ROI. Again, you'd have to rely on throwing cash at marketing this which would be better spent elsewhere. The VR experience fad is not a worthwhile attraction to replace a flat ride.
- Make the dungeons free with timed ticketing
This is the most realistic suggestion of all your points, but won't happen due to the associated costs with staffing it.
- Or actually build some flat rides that are somewhat themed into the area's
I'm sure that's on the agenda, but they have an allocated capex to work to. The Retrosquad, whilst not ideal, is a temporary solution that aids in justifying the need for flat rides. Given Merlin's recent efforts with theming, it's highly probable any new flat rides will be themed appropriately. I'm sure there is more demand for temporary flat rides than a VR experience for certain.