Best of 3. Single games work too, especially since it's free, but if you run one with larger stakes, playing best of 3 might be slightly better.
Have you checked the bracket link? That was the result after I used the below settings.
I would be fine with this. There's not really a conflict of interest, as all matches are shared automatically in clan chat. Just clarify on how long someone has to play their match before they are deemed disqualified. The only way I could see yourself gain an advantage (and not even really an advantage) is by giving yourself favorable matchups against the less experienced players, but even then, it wouldn't help much.
The matchmaking system can be completely random. Challonge has a seed shuffling system which will randomly make the matches against one another in the first round.
after first round gameplay, it all depends on players winning and losing results. As we don't know who will win and lose.
I can also manually make the matches.
For example, we got two applicants with 1 and 2 king level... I can make the match between them.
We got two applicants with king level 6 - a match can be made between them.