Validators derive a significant proportion of their yield from proposing blocks - both proposer rewards on CL and tips on the EL. Since this leads to increased reward variability (which hurts small stakers) wouldn't it be better if there were no CL reward for proposing, or even a fee?

So at minimum the proposer fee would cancel out all the rewards received via attestations, and by proposing honestly, validators earn back some or all of that fee, plus whatever they receive in EL tips.

Imo this makes it scarier for solos. The issue is chiefly because proposals are a relatively rare duty (especially if you run only one validator). Imagine running a validator for a year and you only see one proposal and the fee wipes out anything you’ve earned so far. Yikes.

Whether or not it is scarier depends on the level of the fee/reward. I would argue it should be lower than it is currently so a missed proposal wouldn't be terrible. And in any case solo stakers generally have good uptime and will rarely miss proposals.