This appears to have not posted last night before my power went out ... so I'll post it now. Plus editing. No, I have not read the intervening 11 pages of posts. I'm not going to. My eyes hurt.
My adaptation is this: the reactor core contains the starting "heat boundary" inside itself - 1 block. You are able to overheat your reactor by attempting to draw too much power from it too quickly. Look at a real reactor - you can throw more fuel in but you're creating more heat. As this "heat" builds, the heat damage boundary expands, and as it encompasses blocks (at 5% overheat it grows 1 block, 10% 2, etc.), they begin to take damage. Now, this should be exponential - you should start seeing close blocks take decimal damage very quickly and then slowly growing to larger hits. However reactor blocks are immune until heat hits 100% - at which point they almost instantly disintegrate and you have problems. This could include A. massive, single explosion to punctuate the fact that you pushed the ship too far or B. sudden lack of power generation and a LOT of slowly decreasing heat damage. To DEAL the damage, you use an explosion calculation every *arbitrary interval*. It can only damage the closest blocks.
This system would basically turn your ship into a microwaved cheese block, hot and melty on the inside and stable on the outside, should you fail to keep the heat down.
This one reactor can generate x power, and can have 9 (in a cube around it) coolant blocks attached. These coolant blocks can have multiple variants. There isn't just one "icecube", there are differing levels - so fighters need a basic "radiator" and destroyers an entire array of coolant units of maximum efficiency.
When that's not enough power - when you reach the hard-limit for pulling generation from the reactor (somewhere FAR ABOVE the maximum amount of cooling you can get around it), you build a 2x2x2 cube. It gets significantly more generation than just 8x, but generates far more heat the more generation you pull. But it can fit a 2-block layer (up to a 5 block cube) of cooling systems around it, giving it the capacity for significantly more stable power. Every layer added (3 blocks, 4, 5, etc) to the cube size adds LESS power than the layer before it - like a square root function. However, it keeps growing to fuel the Titans people want to build.
Every layer added also adds an extra layer of coolant blocks, however exponential decay on coolant value per added block means coolant capacity NEVER outruns maximum generation and indeed falls farther and farther BEHIND the generation to balance the fact that YES, AS ALWAYS and FOREVER ... bigger ships are more powerful. It costs more to have them, though, and these blocks don't have to be cheap.
How do you plan on accomplishing this efficiency jump to make systems take "5-15% of current space"?
Currently, the power system reflects what SM is right now. YES, it encourages a specific meta type of construction but that is a very BROAD meta, and any new system is GOING to encourage a specific way of building the system to max its capacity. There will ALWAYS be a "best way" to use the mathematics in a particular system. It is because SM has so many variables in play that there are many viable ships.
TL;DR:
Reactors should generate heat as a byproduct of power generation. Coolant systems reduce that heat. Multi-block reactors (in cube shapes) add more generation but way more heat, and allow more cooling system space (but not enough to fully combat increased heat gen). Power gen and cooling increases suffer exponential decay as you add more reactor/coolant blocks. There are multiple types of coolant blocks (trading increased cost/mass for more effectiveness by volume).
Heat (as a percentage of 100) adds blocks to the "heat damage boundary" which initially encompasses only the reactor core blocks. They and coolant systems are immune to damage until 100% heat is reached, at which point they nearly instantly disintegrate. Higher %s cause more heat damage using an explosion calculation just like missiles, except internal (relative to ship).
My word of caution is just that: Don't ever eliminate variables for the sake of eliminating complexity. It is the complexity and interaction of all the elements that make SM such a great game, even in Alpha.
The main problem is the new restrictions. Those heat boxes ought to go - they just restrict systems placement. Adding NPC crew that are capable of manning stations - literally a computer they stand at - to increase the efficiency or change the curve on a graph for a certain system will incentivize interior, especially if they have requirements. But you don't NEED to force interior; people who take pride in their work are already building interiors. And they're the ones who have done the math to minmax the systems they have.