I'm going to let you guys in on the format of a big time counter-strike league that I used to play in. I think there were something like 5000 5 man teams enrolled in its hay day.
The system that the league used, was able to naturally filter the best teams into sepparate divisions of the league. It was set up into 4 main divisions(open, intermediate, main, and invite), with the best teams being in "invite", and so on. Here's how it worked:
Anyone could register for open. Once per week, each team would be scheduled a match against another team in their division(open vs open, main vs main, etc.) After 8 weeks, bracketed playoffs would commence, with the winners moving up to either intermediate, main, or invite. Typically, the final four teams or so would move up to main, playoff contenders to intermediate. Then a few weeks later, the next season would start.
This is how each of the four divisions would work, with the winners/elite teams moving into the higher divisions. If you weren't one of the elite teams, you could always play the next season in the open(or previous played) division again.
However, this enabled there to be a natural "funneling" of the best teams into the higher tier divisions. Obviously, the first season would more or less be an all open league, unless specific heavy hitters were invited into an invite league(good idea).
I think a setup like this would work wonderfully here. As a frame of reference, in the counter-strike league, there were about 20 teams in the invite division, 50 or 60 in main, a couple hundred in intermediate, and thousands in open.
It's great to see so many people jazzed about this idea. I'm in, certainly, and will provide what assistance and official sanction I can.
There are some pros and cons to using the official tourney system for this, mostly due to the fact that while our tourney system is badass, it's still fairly limited in what it can do. The short version is that the software can only handle bracket-style tourneys. Which is no bad thing, as you could start, say, 5 tourneys at a time, people can join as many or as few as they like, and winners get overall "tourney victories," with the first person to x victories declared the overall winner.
Doing everything manually is much more flexible, since you can run whatever sort of system you want, but it has the disadvantage of being infinitely more time-consuming for the organizer (and slower for the players). Organizing large groups of people in an fairly intricate endeavor can be very much like herding cats.