I think the answer is "no". The DO schools remain, and their slots are unchanged (or growing, as pointed out). With the loss of grade replacement, what's going to happen is that either 1) the same people will get into DO schools, but now the "average GPA" of the school will drop; or 2) the schools will take people with better overall GPA's (i.e. people needing less grade replacement). In either case, the same number of people will get into DO, and hence the competition in the carib will be the same. If option #2 happens, then the average GPA in the carib will drop (those people who prior would have gotten into a DO school because of grade replacement will end up in the carib, and drop the GPA).
Bottom line is that the total number of MD/DO/Carib slots remains the same, and the number of applicants remains the same. The rules of the game might change, depending on what the DO schools do. If they chase a higher GPA, then students who did really poorly, then repeat and do really well will "lose", whereas those who did fair all the way through will do better. (i.e. if you had all C's (GPA = 2.0), then repeated everything and got all A's, you'd now have a GPA of 3.0. With grade replacement, you'd have a 4.0. Someone who had all B+'s would have a 3.5. So if DO schools want a higher average GPA, they would prefer the B+ student)