In my mind if the intent (as it should be) is to develop good players then competition will do it. Therefore SCYSA should initiate a promotion/relegation system. Currently it is left up to a coach/club to decide the caliber of the team and the perceived caliber of the competition.
I will say however that I have seen it backfire... I have seen high level classic teams completely demolished in challenge. This you would agree it is not conducive to development.
So where do you draw the line, for my two cents promotion/relegation is in order as the gain from competition outweigh the other issues.
A good coach will see the past the scores and determine the level of development. Parents are another issue...