It is true AC had 2-3 years when they were as good as any 5A school in the state. ICCP is in that category currently. You rightly point out that 3A schools like AC and ICCP will occasionally "break out" and make the playoffs beating those teams. And while this is correct, it is the exception, not the rule.
I must say, however, your equivalency of the SCC and CCL is off base. It is unreasonable to compare the SCC which consisted of 3A-5A schools (Marmion was the only 6A school) with the CCL in which 12 of the 17 schools that are 6A-8A.
No one is against the notion that losing can develop character. Losing happens 50% of the time when equal size schools play each other. Someone is going to develop character via the loss. But character is also developed in winning. Moreover, character through winning is developed when the victory is challenging - not when a 7A school hangs a running clock by halftime on a 3A school.
There is a reason wrestling has weight classes. People don't march their 160 lb. weight class wrestler onto the mat against a 220 lb. wrestler. That's wrestling up 4 weight classes. That doesn't develop character for anyone.