More oil in the crank case is like ganging up on a bully in the playground. At a certain point, the crank isn't able to throw it around any more. The external oil system idea is to keep oil going to the heads giving two paths for the oil to get there... redundancy. If the oil in the crank case gets tied up, you still have a quart or two doing some work via the external system. The cams keep some oil up there without returning all of it. The reason it's pumped up there is to keep it fresh. The cams also need less oil than the crank to survive because of the lower amount of stress on those parts.
You are right about cavitation, I miss spoke (typed)...
