Well the current army isn’t actually especially large as it’s reliant on theurgic capacity you’re unlikely to have. Reducing the wards to keep out only magical storms and roving undead would mean you need some manpower on your less fantasy zany territorial boundaries.
I don’t really think loyalty is necessarily an issue for the actual military. You’ll have to replace the officer corps entirely but as long as you can keep the rank and file paid, I don’t see why they’d have any particular loyalty to the old regime. The Alastors are a knottier problem, I admit, because reform would require stripping them of a lot of formal and informal privileges. Dissolving the institution and distributing them amongst the other armed forces (so that former alastors are a minority in any given unit) is the best option if feasible.