I've had a theory for a while on the mechanics of advanced uses of conqueror's haki, and you've come to more or less the same conclusion, but I feel it's a bit.. unrefined compared to my own.
The way I describe it, the standard usage of conqueror's haki is a short burst that knocks out weak willed opponents, but leaves stronger opponents more or less unscathed. The advanced method of using conqueror's involves a continuous wave of haki, a mental intrusion even the strong willed can't ignore.
I don't think it would "paralyze" them, or make it so they can't use their haki at all. If it were leave them that vulnerable it might as well just knock them straight out. Instead it distracts, puts them on edge. They can't focus on their fighting so well, on their haki, on their technique, on their coordination. It leaves them vulnerable, but they're still capable of pushing through it and continue fighting.
That's where the drawback comes in. While the continuous wave of haki does have a great negative effect on the opponent, it requires a great deal of concentration. In trying to put his opponent at a disadvantage, the user may lose sight of the physical fight, leaving the user vulnerable. He's too busy trying to use conqueror's to throw a decent punch, or respond to the opponent's attack.
Of course, someone very skilled (like Shanks) would be able to use his conqueror's continuously with no meaningful drop in his physical ability and his usage of the other types of haki, but it's the sort of skill that could take Luffy some time to master completely.
No ability should be an instant win. This advanced method of using conqueror's seems nicely balanced. It can be of incredible use, but it can also be the users downfall if they're not skilled enough, or if the opponent is just too powerful to be effected, even if they themselves can't use conqueror's.
Besides, I'm quite sure Sabo will be the one to fight Tebol. Who better for a newly made logia user to fight than a skilled one?