Chevron,
I would propose the system work something like this. Participating Yeshivos get to set aside a specific percentage of their student body. The Yeshiva evaluates the candidates and chooses.
The problem you point out, that Yeshivas have different percentages of capable talmidim is a real one. But I suspect that the percentages of top quality talmidim will even out because people will try to go to institutions where they feel they have the best shot at a dichui.
See above for my response to your last question. I answered in response to mdd.