smjsl - you sure are spending a lot of time figuring out how to model this!
But since you are trying to do something that I did, I will tell you what I did and the outcomes.
First of all - I never considered the S&P500 to be my benchmark, because it was very concentrated in large cap growth stocks in the late 90s when I started my portfolio. Plus it was market-cap weighted which I always thought was crazy anyway.
Since I was setting up a portfolio that had a given bond and stock allocation, I picked a well respected balanced fund with similar allocation as my "benchmark".
And the idea was for the same reason you did - if over several years managing my own asset allocation did not outperform the balanced fund, then what is the point of managing my own AA? Why not put in all in the balanced fund?
And to achieve a reasonable comparison, during the 2.5 years I was averaging into my target asset allocation, I put an additional chunk into the balanced fund. It was about 10% of my portfolio.
So that made comparisons relatively easy using the Quicken ROI functions which takes into account additions and withdrawals. For any time period, I could look at the ROI of my portfolio not including the benchmark, and compare it to the ROI for the benchmark fund. Straightforward and accurate comparison.
Now - some interesting stories about using a benchmark:
I started out using WEBAX. During the early 2000s, my AA portfolio did at least as well, but then I became aware of other balanced funds that were doing better - namely DODBX. That became my benchmark for several years outperforming my own AA, and by 2005 I was seriously considering just putting any new money that came my way into it and that is what I started doing.
But low and behold - 2006, 2007 - my more broadly diversified AA portfolio started to outperform DODBX - blowing it away in 2007, and really crushing it in 2008. Yep, new money I had added to DODBX in 2006/2007 was hurt badly whereas my original AA portfolio did way better. Of course the reason is simple - DODBX rode the wave of large cap value doing well much of 2000s, but by late 2000s large cap value did very poorly. My more widely diversified AA portfolio was behind for a while and then it screamed ahead.
So what happens? You guested it! Now I have yet another benchmark! OAKBX! But given the performance of my own AA portfolio over the past 5 years, I have renewed confidence in it and will stick with it. Where any new money goes - I don't really know. But I probably wont have that much new coming in anyway as I no longer have many assets outside of my retirement portfolio.
What is the moral of this story? Even if you pick a benchmark and then decide to abandon your own AA in favor it it, you might still encounter periods where your benchmark underperforms. Past performance does not guarantee future results!
It's a tough call!
But I still think it's useful to have some comparisons - it keeps you honest, it forces to you look at some of the details you might otherwise gloss over.