its not a no-no to take a spot higher on the S-curve - by definition, it has to happen, if you move people down. for example, the #40 guy takes the #43 spot, then the #41 guy will try to take the #40 spot first. you are correct though that they will never move you up a spot when a higher ranked team already has that spot.
i agree it seems stupid. i believe the system used to only check half regions - and someone reported a bug with PIT seeding, basically, that you could meet before the elite 8. i think seble just had the engine try 1 level out in tournament seeding, affecting the NT, too. its not 100% clear if that is the case, but i strongly feel like when the projection report came out, it almost matched the seeding exactly. checking the region on top of half region dramatically increases the chance of shuffling.
i actually found this issue like 10 months ago, and submitted it as a bug. seble said, it was the way it was intended. i thought that was a bit of a cop out, because i strongly feel it didn't used to work this way, but there is some merit to it. i pointed to the fact that the NCAA rule only requires you to check the half region, well, it used to, until that requirement was removed in anticipation of the big east sending over 8 teams. but the NCAA does also require the top 3 teams from a conference to be in their own region, and i honestly would prefer to see the top 4 in their own region, and so there is some merit to trying to split guys that way.
as far as the way teams are viewed 1 by 1, kind of agree its stupid, but only from the standpoint its not that great of a way to do things. however, its a tough thing to program really well, and i think as far as quick simple solutions go, this is not a bad one. its sort of like scheduling that 11th game for some people automatically because they cant schedule well. its kind of dumb (clearly, this has a bigger impact), but im also not sure its worth the effort they would spend trying to fix it - considering its very possible the "new" method would be just as flawed, maybe even worse, wth IMO only a minority chance its more than marginally improved. so i basically agree, but i also dont think i would want them to fix it, if i was still coaching a team.