I think this doesnt sound so simple anymore =) As for randomly generated teams this would likley be an issue for myself certainly. I simply don't have the Manpower to match any character at any pwr lvl nor do I have the renown to do so. It sure sounds fun tho.
As for the leauge setup I might think simply give the winner Points as you do in most sports leauges?
A win gets you 3 Points. A loss if you are underdog gets you 1 Point.
Everyone plays everyone a set number times, alternating between home and away games. Coinflip for who starts home.
At the end of all matches tally up the scoreboard and the top x amount of players go to KO tourney.
In case of someone having the same score the amount of underdog matches won determine who comes out on top.
If still equal just run a KO match.
Pros and cons to this very not thought thru idea...
Simple!
May allow for players who sync up to play all their matches in a row.
Might be next to impossible for some to get on at the same time, dragging the leauge out indefinatley. (give each player a random opponent to play as substitute?)
Not really sure how this aims to balance for player skill but with random teams luck should be a bigger factor.
Shouldn't the best player win anyway?
Well it's nothing if not short of perfect but just a more simple train of thought.