General Availability: Microsoft Information Protection sensitivity labels in Teams/SharePoint sites

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I have heard that Microsoft are looking to split content and container MIP labeling to mitigate this issue. Any ideas on timelines or any other advice we can use in the short term

Yes you will be able to select the scope when you are creating the label as shown below. Can expect to see this  before end of this year I guess. As always Sanjoyan Mustafi  has done a brilliant session yesterday about this , sorry I can't find the link to the session. 

It is possible to combine the labels sets and reduce to three :

1. Public - add footer to content plus block external access in Teams.  Why do you want to stop external access on Public label?  Normally Public label will allow external access. I hope you mean public - all internal staff except guest, if so you can as below

2. Private/Internal - add footer and encrypt content plus block external access in Teams - yes you can as below 

3. Private/External- add footer and encrypt content plus allow external guest access in Teams - yes you can as below 

If I create these label I will create as follow

1. Public - allow all staff + guest ( Public - anoyone in the organisation + Let O365 group owner to add gues in to the group)

2. Internal - allow all staff  ( Public - anoyone in the organisation )

3. Confidential - Allow  only dedicated staff ( Private- only members can access the site )

If you really want something like dedicated staff + dedicated guest , I would recomend to go with a sub label.

Hope didnt misunderstand your question 

Thanks.