The popular vote wins each state. Nebraska and Maine for some reason try to split the vote -- My understanding they have some gerrymandering going on but who really cares, they only have 5 votes between them so the maximum difference a split could have is 3 votes out of 538(?) But the theory may be correct to break it down even further within the state. But states would then lesson their impact on the candidate chosen overall in that state. So winner take all makes more sense for each state.
The argument about the popular vote of the whole nation winning an election only comes about because we think we can count each vote in the nation. Which it appears we can. But as you point out that really runs counter to the articles of confederation concept. And just tears up the idea of what "United States" of America means.
Your reference to Stalin is really on the mark. Death of Stalin and they became the Union of Soviet Socialist Republics. But in their case they did not really give states rights, read that Republics rights. And of course it ultimately failed. Probably that would happen here as crazy as it sounds. Some analogy to our Civil War is present.
So I think our best method is indeed within states, as is the case here in California we have been so overwhelmingly led by democrats at the state level that the gerrymandering is just a full on fact and will stay that way. Fix that and you fix the electoral college.