"Can't Cut" is only useful for public leagues and when you're dealing with several newbies and/or strangers. If you all know the game and each other, I think it's insurance you don't need.
As for your keeper strategy, my long-time H2H league (12 teams) has run with 3 keepers for well over a decade, and we made the decision to switch to 5 next year. The main reason is that 3, it's generally obvious who your keepers are because 99% of the time it's just your Top 3. With 5, your choices get just a little tougher, and you're more likely to take a flyer on younger or unproven guys (I'm thinking players like Harper or Willingham here).
Just make sure that (a) you've got caps on how long players can be kept; and (b) you roll out keeper changes a year in advance.