There's honestly no way to really "fix" what you're complaining about, and it doesn't need fixing in the first place. All parrying does is double(triple?) the end-lag a move has, and provide invincibility. If a move doesn't have that much end lag, you won't eat a hard punish. If it does, you're going to die at 50 because you were being really f***ing stupid.
Short hop Nair with Wrastor isn't really what I'd call "stupid", it's more like "the bread and butter of his neutral game". Unlike all of the other characters, he has no range game to fall back on, pressure is literally his only thing. If he has to think twice every time he hits a button for fear of being hit with a smash attack he's going to be bad.
Imagine if Melee Fox could never safely Nair or DownB, he would be terrible. His entire playstyle relies on the safety of those moves.
Incidentally, a way to "fix" this issue might be to have parry lag depend on the damage a move does, not how long it stays active. This preserves the general trend where harder hitting moves are stunned longer (as those moves also tend to have longer recovery), but weak, active moves like sex kicks and such are no longer ludicrously vulnerable to being parried.
Kragg will never be top tier because of a single UNIVERSAL mechanic
The mechanic is universal, but the reward off a parry is not. If Kragg parries almost any tilt or aerial when you're at around 80%, you're dead. So far it doesn't look like anyone else gets guaranteed death at those percents.
If anything, Wrastor or more combo-centric characters will benefit more, because they can start something up then kill you super easy.
Maybe if it turns out that they have truly guaranteed 50-death combos or something, but their combos are obviously going to be vulnerable to DI, whereas a simple downsmash is much more reliable. Also, Kragg did pull out some pretty decent combos himself off of parries at low percents, it's not like he has no combos or anything.
You're also forgetting the fact that Kragg is SLOW AF. You can see what's coming a mile away, so he's probably going to fall victim to parrying more than anyone.
Kragg's neutral game largely focuses around Rock and Pillar, neither of which are particularly vulnerable to parrying. You might think "well, all you have to do is get in, then his slow normals will be a liability", but of course he has Parry to make you think twice about going in.
I am pretty sure the lag after a parry has been increased since the June build I have
I assume you mean "decreased"? As in, you get a lesser punish after a successful parry?
They key is that you need to bait out parries by whiffing areal approaches, or dashdancing, or... whatever. Then use the window after they missed to start up a combo.
From what I saw, the window is incredibly short. Kragg probably missed about 30 parries in that set, and got punished maybe twice.
Also, if you have to face a 50/50 every time you go in (will he parry or not?), with a potentially disastrous punish if you guess wrong, people will tend to fall back on safer options, like long-range combat, resulting in a very defense-heavy game. There need to be some low risk, low reward pressure options that don't lead to much but can't be punished by parrying. Right now, it looks like only jabs fit this bill. Most characters probably need at least one aerial that is also fairly safe.
Its also important to know when they can escape combos and you should stop pushing forward.
The bigger problem is that there are times where you may have momentum / advantage, but you still can't push it very hard because the risk of a parry is too great.
Having been playing with the system for nine months I think it feels pretty good.
My biggest concern is that most of the people playing this game seem to be Melee vets who don't use spot dodge much because in Melee it's a terrible option. Watching that Sethlon set, I could see at least another dozen times I would have parried as the Kragg player, and in almost every case it would have worked. One of my favourite spots to Spot Dodge in Smash is whenever I'm at a minor frame disadvantage, say, -3 or so. In Smash, there are very few moves that have 3 frame startup, yet whenever someone has frame advantage, they basically always want to press a button, because they know that if I was also to press a button, their attack would become active first and thus they would win the exchange. A spot dodge in this situation is almost always successful, even against good players. Melee vets would probably tend to wavedash back in this situation instead, which is not rewarded nearly as heavily in this game.
We'll see what happens when the game is out next week, but this is definitely the mechanic I'll be watching most closely.
Again, I would just be happy if there was more end lag on missed parries, to make them easier to punish and more risky, but other than that, I think they are fine.
This might help, though I feel that you don't want the risk / reward to be too insane (guess right = take a stock, guess wrong = lose a stock), because then the game becomes too random and volatile. I would lean towards lesser reward on a successful parry instead.