I understand the max bet part, but what if a player bets 1BTC and wins (way below a max bet). Do the 0.25% and 1% guy participate equally based on portion of the bankroll or does the 1% person get 4X more than the 0.25% investor?
People who run 100% kelly get 4 times the action of people running 25% kelly, yes. By definition, pretty much.
A says "I'm willing to risk up to 0.25 BTC". B says "I'm willing to risk up to 1 BTC". We sum those two, and present to the gambler "the site is willing to risk up to 1.25 BTC".
If the gambler comes back and says to the site "I'll take 50% of what you're offering", we say to each investor "he's taking 50% of your offer".
I don't see how any other way would be fair.
The other ways also only work in certain ratios of high:low risk investors.
If you try looking at a situation with 20k invested low-risk and 2k invested high-risk in some of the other proposals you immediately see that there ends up being no difference between them.