I like how our league does it. We have 3 weeks of qualifying and 1 week of finals. Anybody whom participates in at least 1 week of qualifying gets to play in a finals bracket. Sometimes this means we go down to a D division. Top 8 make A, then 9-16 make B, etc. Payouts are identical for 1st through 4th place in all divisions. It breaks things up some and allows everyone the chance. The key here is NO RESTRICTIONS.
We also have a monthly event where we do 3 hours of match play and then top 4 make A finals and next 4 make B finals. Payout is split 50/50 for A and B. I've heard arguments that promotes sandbagging since there isn't a restriction but I've yet to see it. Maybe when payouts could be in the thousands (like Pinburgh) that's an issue but when your looking at $100 I don't see anyone trying to get in B.
For me it is the restrictions that drive me nuts and have ultimately drawn me out of competitive pinball for the foreseeable future (at least traveling wise). I'm an "A" restricted player. I've never won a major tournament and have only won local league type events periodically. I'm doing well to just qualify these days in the real events but am also told I'm to good to play in B. What drives me nuts is when I do qualify and I place 5th-8th in A then I turn around and see players equally as good (just play in less events) winning B and taking home more than double what I got for finishing higher in the event. Just doesn't feel right to me.
This, to me, is where there is a clearer line between "league play" and "tournament play". For league I say to spread the wealth but for tournaments, those should be more linear. As a player I just don't want to feed a pot that I have no chance in winning because I'm not allowed to play in that bracket and when you start adding restrictions or rules to create more randomness in winners for Tournaments you start to alienate a lot of people real fast (those that are to good for B but may never win as an A player).