The idea of the very best individuals going to competition obviously has some merit. The issue seems to break down to how to do it (and the fact that some people don't like the idea). Some other science competitions already do only all star competitions. Intel Science Fair is an example of a competition where individuals rather than teams progress. I believe there is some sort of math and also a physics competition that sends the best individuals to competition rather than the best team as well. SO seems early on to have decided on a team approach rather than an individual approach, and that is perfectly fine.
There are advantages and disadvantages to either the team or individual approach. With the individual approach we are more likely to see the very best individuals progress through the competition. We all know for example that often the best bridge, or egg-o-naut, or trajectory, whatever, never makes it to Nationals. For some competitors it can be very demoralizing to realize that they didn't go to States or Nationals only because they are on a team that isn't highly motivated like they are. As well, it can be demoralizing for a very competitve individual to wonder if they were really good enough to beat the best competitor in the country, rather then just the best competitor who's team made it to Nationals. The team approach can be a wonderful bonding experience for the team members. Sometimes the motivation provided by 14 other students can make a competitor just that much better. Logistically it is obviously easier to send 120 teams to Nationals then it would be to send 15 times 120 individuals. Some of the other competitions that do send individuals (and some that send teams as well) are well enough funded that they pay for all the expenses of everyone going to competition. Intel pays the expenses for their National (international?) competitors, DOE pays for the competitors in their math competition, etc. Perhaps if SO had a sugar daddy like DOE or Intel then they could afford to pay the expenses of all the competitors and their chaparones.