As parents, I would think that we would want to avoid this imbalance at all costs. The idea that "this is competitive" is the worst idea as it does nothing to grow the sport to a broader base. This is the mentality that you often hear from wrestling, boxing and other sports that have gone to the waste side. The idea that goal differential matters after 5 is a terrible rule. I would much have teams go down to PKs or some other tie breaker rather than putting a 22-0 beating on a team. Also, since this team is in the wrong flight, this is driving the other teams to beat on them as well. "Hey Team X got 22, we need to get 23!"
We have been on both sides of these blowouts and no one is happy when it happens. The game turns into 90 minutes of messing around for the team that is winning and the losing team get frustrated. While the example given by OP was for young girls, this happened not just at that level. My concern is that there are teams that enjoy putting on this type of beating (and start showboating) where eventually the losing kids have enough and start fouling or going in hard. As surfref mentioned, once the kids get a bit older it will be harder to handle.
One of the main issues that was brought up is that is partially due to the landscape of how many tournaments we have. I think if there were fewer tournaments, then you would get teams more closely aligned to play together verses these blowouts or teams jumping into tournaments in the wrong flight (up or down) just because it is a free/low cost one. Not sure how to actually do this but something needs to be done.
"Gone to the waste side" now enters my list of spoonerisms.