The new ships would have given Japan an overwhelming advantage on paper, particularly against the Royal Navy. It is hard to imagine the UK tolerating this. On the other hand, the UK did not have enough money to really do anything about it should it have occurred. The US did.
Your statements have the British dilemma. The British claimed they could not tolerate/accept many things, but in the end, the gave in. About a decade before, the British said they had to have a 2:1 advantage over rivals. Then it became ok for parity with the USA and a 1.6:1 ratio. At some point, they British would have reached the truly unacceptable ratio, and decide another sacred cow was no longer sacred. The truth is, there was a decent size list of things that were more important to the British than these ratios such as:
1) All those money losing colonies (most of Africa, Eastern Pacific Islands, etc.) There were hugely valuable, strategic resources in the British Empire, but things like Cameroon and Kenya were not these items.
2) The Gold standard at prewar rates. Often after very expensive war, a countries currency is permanently debased.
3) The white dominions were not carrying their share of the naval budget. There were about as many whites in the white Dominions as in the British Isles, but the UK was paying for the capital ships that benefited all. This problem is not unique as the USA and NATO shows.
4) Some of the domestic priorities of the government. There are budget cuts that can be made that don't lead to a communist revolution in London.
5) Not scrapping so many ships. They did not have to build the extra ships they need, they were built. The Orion and King George Class look like they would have had value in WW2.
6) India wanted to be a full Dominion, and they likely would have agreed to large military expenditures in exchange for this change. It could have been mostly Indian divisions in the BEF in WW2.
So the RN enthusiasts are right the UK could have afforded more ships based on GDP, just as you are right they would not. The RN was just less sacred than other sacred cows. Germany had the same issue pre WW1. Plenty of money for an army 50% larger, plenty of men, but sacred cows were in the way such as exclusive Junker officer class and German social programs.
http://en.wikipedia.org/wiki/List_of_dreadnought_battleships_of_the_Royal_Navy