You may have a combination of issues, but it isn't likely overly-rich soil is one of them. Panicum prefers fertile soil.

First, your zone is at the bottom of Panicum's hardiness range. Even in full sun, your growing season may not be long enough to fully support the plant.

Second, you mention you water "sparingly, if at all." Panicum does best in medium to moist conditions.

Cutting the grasses back before blooming is not an option. You'll end up with square-ended blades, which will continue to grow, and develop browned square tips.

Re-doing the soil and replanting the sweep will be terribly labor-intensive. I'd suggest trying something else. Get some netting of some sort. Farm supply firms sell 6" square polypropylene trellis netting, used for growing pole beans and other vining species. You can install this horizontally, supported by stakes, and force the grass to grow up through it. As the grass grows, the netting will disappear, but still provide support. Chances are a single layer, about 2 feet above the crown, will suffice, but you may want to go to a second layer as well. Be sure to stretch the netting taught and use plenty of support stakes. Don't bother trying to get the edges of the planting under the netting. Just trim away any blades/culms which flop around the edges. As long as the majority of the planting is supported, it will look great.