Without the penalty, I find you almost ALWAYS have superiority in either a) quality, or b) quantity. Unless you seriously mismanage your resources, you'll likely be able to compete with most other countries airforces (as a major power) should you so choose. I'm just starting a vanilla game as the UK, and I've nearly wiped out the German luftwaffe. And it's only 1941! When they enter war with the Soviets, well....
As the British, break up your stacks of fighters into groups of 3-4.
Never take on the large German stacks; rather, be opportunistic and strike smaller groups or individual planes. They'll tend to have these uber-stacks led by Kesselring and Sperrle; try to wipe out the small ones that litter the coast consisting of 1-2 fighters or dive bombers.
Also, avoid fighting them over their airspace; they'll get a huge bonus for base proximity. Fighting them over neutral territory or the Channel will eliminate that bonus, and potentially provide yours with one (depending on where planes are based).
As Germany, the British AI will periodically relocate without any loss of organization. The best way is to let them get hammered by the AA and then attack deep in the Reich. You might lose a plane or two, but they'll take a beating. Once you build up the Luftwaffe, you can pretty much do whatever you want. The Russians will also threaten with big stacks, but their AI will inevitably station them in a province that is about to be conquered.
I can see the argument for removing the penalty as somehow levelling the playing field; that being said, despite the advancements of AI in CORE and other mods, human players can still use all sorts of innovative tactics that maintain a considerable advantage. Would you relocate 15+ plane stack to a province about to fall?