I would focus, by far, on improving employee behavior. You need more money in that plan before you can negotiate/shop around for more bells and whistles / lower fees with your provider. You can EASILY up the assets in that plan, if you simply educate employees.
I would work on:
1) Get auto-enrollment turned on for employees if that is remotely possible.
2) Get lifecycle / asset allocation funds added to the plan and make them the auto-enroll option. This takes away the paralyzing fear of "what do I pick in my 401(k) if I actually enroll?"
3) If reasonably priced asset allocation funds are not available, consider making some blended portfolio model (i.e. 60% stocks, 40% bonds) the default choice for employees who opt into the plan.
4) If possible, get the automatic increase option for 401(k) contributions available as a 'feature' on your plan. Some companies refer to this as "save more tomorrow" or some branded version, but it allows employees to choose to automatically bump their contributions 1-3% per year.
You need to educate employees on how to use the 401(k), but more importantly, you need to have days and times (maybe once per week for a month) where you have a mini HR fair to get employees enrolled and correctly allocated. These events need to be publicized and well-run.
Most people think that 401(k)s are under-utilized because employees don't understand the benefits. Bullshit. Most are underutilized because humans are lazy, and setting up most 401(k)s is scary and foreign and they don't quite know how to do it. Receiving a massive packet in the mail isn't nearly as good as simply saying, "Hey, bring your lunch and swing by the canteen - we've got plan rep Joe Blow enrolling people from 11AM - 1:30 PM every tuesday for the next 4 weeks. Should take about 20 minutes per person. E-mail joe to book a meeting at JBLOW@PLANPROVIDER.COM and mention the day or time that you'd like.
Persuasive educational messages given to college students about tetanus and the importance of going to the health center only resulted in 3% of the students going. Given the same lectures and a copy of the campus map with the location of the health center circled following the discussion brought 28% of college students to the health center.