The "exploit" is building your Vault so that it has zero Pillars and Pendulums, and then converting cards depending on who you have to face. It's not a huge game breaking exploit, but it is silly and should be avoided imo. Starting Vault should be something you build with care and finesse, not just take all the cards you can grab and later convert half of them.
One easy solution would be to increase converting limit to 24.
Also I'd like to change converting rules so that you can somehow convert cards to any card of your element. This should of course be heavily limited. I'll have to think about it some more.
I'm pretty sure every team that would design their vault without thought and finesse would still be at a big disadvantage against teams that design their vaults right. Also, after 1 round of 'utter chaos' all vaults would have roughly 15*number_of_players pillars/pendulums, and all vaults would lose much of that flexibility.
In fact if eg. your team faces 4 opponents from one element on round 1, and so you decide to convert cards that are useless against that element and keep a lot of cards that are strong against that element, that would severely affect all the future rounds and could prove to be a really bad decision. Especially since round 1 is salvage 6 discard 6.
As for conversion into any card of your element, I can think of one kind of limit - only spells can be converted into spells, only weapons can be converted into weapons, only shields into shields, only 'other permanents' into 'other permanents', and for creatures, we might split it into 'cheap creatures' (cost <5), 'medium creatures' (cost <10) and 'big creatures' (aka dragons).
And I don't think it would make intelligence useless, since mono decks are really rare and as I've seen most teams prefer relying heavily on off-element cards to surprise opponent. Probably in-element conversion would make mono decks a bit more popular, but that would of course come at a price that such decks would be easily countered often.
Generally intel stays almost the same. It's still "they have at most that much of that card" and "they probably don't have that card". The only difference would be that in-element cards would be harder to track this way.