All-State teams should include the best (however-many) players in the state, regardless of team records, championships, etc.
I tend to downplay statistics (a bit) simply because I know that simple numbers do not an all-star make. Example #1: Player A is an excellent passing MF. His teammates, Players B, C and D are poor finishers. Result: Player A finishes with a decent, but not eye-popping 12 assists, instead of 25 assists. Example #2: Player A is a decent passing MF. His teammates, B, C, and D are great finishers AND his team's official scorer is (how shall we say this?) generous. Player A finishes with 28 assists.
The real key to All-State selections SHOULD be the "eyeball" test. Unfortunately, nobody sees everyone, much less, sees everyone multiple times (the only way to judge fairly). So we go by name, reputation, numbers and (when available) nominations and recommendations. And people get honored, or left out, inappropriately.
I know first-hand what it means to kids, because I saw what it meant to my son. As "the adults" in the room, we should do our level best to make the process as transparent and representative as possible.
One more thing. With respect to the gent from Liverpool, I'm sure he'd be the first to tell you that even HE would have to see a kid multiple times before he could make an informed judgment.