There might be some (rather) moderate moving of front towards what was the Hindenburg line of OTL, where the Entente will now be stopped after having already lost a HUGE amount of men and material.
I think your suggestion here that the only penalty the Germans pay for remaining in the overextended forward lines of 1916 is to be forced back
involuntarily to the line of the Hindenburg significantly understates the penalty the Germans will pay for not shortening their lines. I think it more likely that the result of Germany trying to keep and patch up the old front line will be Entente offensives that gain enough traction to push the Germans back to the lines of 11 November 2018. That is, a liberation of most of occupied northern France, the western third of Belgium and the complete “flattening out” of the German “bulge” in the western front.
If the Germans somehow scrape enough of everything together to limit losses only to the green area in the western front, it will have only been able to do so by stripping support from the Ottomans and Bulgarians and probably Austrians.
Weakening the support for the Bulgarians in particular will enable an Allied breakout from Salonika in 1917, and cause the beginnings of the CP collapse.
Look at it this way - Between December 18th, 1916, the conclusion of the battle of Verdun, and about a week after the conquest Bucharest, until 1 September, 1917, when the Germans launched an offensive to take Riga and accelerate the weakening of Russia, Germany initiated *
no offensive operations at all* on land.
https://en.wikipedia.org/wiki/Timeline_of_World_War_I
https://en.wikipedia.org/wiki/Battle_of_Jugla
That means, for January, February, March, April, May, June, July and August, a total 8 whole months, the Germans did not take the offensive on land. (U-Boats and aerial bombing are another story, and they may have had air superiority for much of 1917). The German Army would not yield the initiative to its encircling enemies for so long without a very, very good reason.
The only reason good enough to not launch a major offensive on any front in that period of time must have been because it just wasn't possible, because the Germans were spread too thin on all fronts and in their industry.
If we spread them thinner still, by holding the old front-line in the west, and not retrenching to the Hindenburg Line, something is going to give, and it will snowball into catastrophe for Germany before the year is out. The western front will give out to one degree or another, or the Salonika, or arms production.
Then, also think about the obverse positive effects on the Allies.
With the Germans at their forward line in France, they will be where the Allies expect them to be. The Allies in OTL kept on the strategic offensive in the west, most of the time between April 2, 1917 and December 3rd, 1917. Much of the time it was British troops and British Empire troops doing the job alone, without the mutinying French and the tardily arriving Americans.
Now in the ATL, instead of a pointless disaster, the French and British are likely to make gains fairly early in the 1917 campaign to push the Germans back from the 1916 lines to where the Hindenburg line would have been in OTL.
While bloody as all hell, these gains will be quite large by WWI 1917 standards. They will make even French commanders appear less inept, which probably dissuades the French Army from going on mutiny/strike at all. Thus, with a better initial return on its 1917 offensive investment, France can spend more of 1917 having more of its forces on the attack. This combined with all the British pressure is going to push back the Germans further.
That level of progress could well get Lloyd George to stop holding back British troops from Haig as he started to do in 1917. Instead, Germany will be pressed all the harder by the British and French all through 1917. The combined weight of those offensives should totally flatten the German bulge and get the Germans back to what the front line was at the time of OTL's armistice, running halfway through Belgium. At that point, even if the Germans are not also dealing with a parallel Bulgarian collapse, it will be obvious to the German high command and soldiers alike that they've lost so much ground that no gamble in 1918 could offer them victory.
That is going to suck for German morale, and despite potential variations on this front or that in detail, it is going to cause Germany to sue for armistice and to effectively give its people permission to have a revolution, most likely before 1 November 1917.