Fact. The idea of lateral-entry O-5+ is a flat-out minefield in my humble opinion, unless you're talking about some niche professional field. You could bring, say, a neurosurgeon or a judge in at that high of a rank. But that would just be giving them a place in the hierarchy that befits the professional qualifications and credibility they already possess. I know in WWII that heavy hitters in their fields were sometimes commissioned as O-5s or O-6s for special projects to aid the war effort.Rank is for authority and responsibility. If you just need pay for incentives, that's what bonuses are for.
That said, for the URL and the fleet, this would be a minefield. I'm certainly not a fan of "up or out" or the timing system; I think they're dated and long overdue for an overhaul. But how to being in someone as a Chief or O-4 after you've ERBed or FOSed a bunch of other people? How to keep this from being a zero-sum game with the people already in and bucking for promotion? Lateral entry combined with competing for promotions could easily create a ton of resentment, and kill morale and retention.