There is always a delicate balance in the amount of destruction a nation should take that won't make them just rage quit. But I do think you'd be better off lowering destruction levels and having an option to not beige a player. While I like the idea of giving someone a chance to rebuild military, it just means people find ways around it like declaring right before another person beiges that nation.
So beige doesn't really help a nation in an alliance vs. alliance war in some/most cases. But this game half war simulator - if people are afraid to see their nations temporarily destroyed they picked the wrong game.