My two cents - its a practical solution which I've seen implemented before - though not sure its arbitrage free. However, it would be worth invetigating whether there is a systematic bias in your simulation which is causing the problem, and if so, potentially correct that bias "at source",...

IMHO, both local calibrations (i.e. fitting to specific instruments) and global calibration (fitting to all swaptions simultaneously) are valid approaches and I've seen them used on a trading desk.   Local calibration is (generally) easier to implement and allows you to reprice the instruments you a...