Is Initiative something that is really a good idea to make into an arms war?
I realize it's design space, but here's my problem with caring about Initiative:
Party has Initiative bonuses, challenge does not. Party wins Initiative more often than not or all of the time, challenge level decreased by some factor as party consistently gets damage/other effects in first. So, challenges get Initiative bonuses to give parties with Initiative bonuses more challenge. Parties without Initiative bonuses then more consistently go after monsters, skewing challenge level the other way.
Sure, different difficulty levels can have different Initiative bonuses, but that doesn't really solve the case where you either have Initiative bonuses or don't. It's entirely possible to play NM without Initiative bonuses, for instance.
Now, winning or losing Initiative isn't the end all and be all of combat. But, there must be some reason parties try to consistently go first, so it matters to whatever degree. Also, I'd imagine it has greater impact in boss monster fights (obviously matters for weird cases like Draccus) later in dungeons, when the party might be more vulnerable to sudden PC death syndrome.
*shrug* If someone is running Init bonus tokens, they aren't running some other token instead (in theory) which also affects combat prowess, so there's a theoretical balance to it all. It just strikes me as too much all or nothing with Init modification and potentially a path that becomes too important to pursue as challenges increasingly take it into account.