It isn't an issue with English players not going abroad - it's more an issue with our leading club sides being filled with overseas imports. If you look at the current Barcelona squad you'll find a nucleus of Spanish players; same with Bayern Munich and German players; same again with Ajax and Dutch players. But if you look at the first team squads of Manchester City, Arsenal and Chelsea you'd be struggling to pick out eleven English first team players between them.
Until our leading club sides contain a nucleus of English talent I fear we can write off any chances of our national side being successful.
But you still get Spanish and German players over here, and across the leagues. How many England internationals have played in La Liga? Single figures? Bundesliga - Owen Hargreaves, and he was born there!
England has about 40-50 players good (?) enough for the national squad. For them to play in the Champions League, they have to spread across 4 clubs. Steven Gerrard didn't play in the Champions League, despite being England captain. Rooney is the same this season.
If there were less foreigners over here, would the clubs be as good as they are now? Is Patrick Bamford as good as Diego Costa? Is James Wilson as good as Robin van Persie? You need a good mix, combined with coaching, that knows how to pass a ball.
Those who have read Soccernomics, will realise England actually OVERACHIEVE for what we are. We aren't the biggest population, we aren't the richest country, and our tactics until about 5 years ago have been very one-dimensional. Foreign coaches in the Premier League spread proven knowledge. Spain's national success over recent years (except the last World Cup) was based on Johan Cruyff's coaching/tactical methods he took to Barcelona from Ajax (itself driven by Total Football of the Dutch).
Any changes made now will not make any short-term difference. We need continental methods brought in by continental coaches, but then adopted by local people.