It's just like the argument against the NCAA tournament, and my response is the same for that as it is for you.
If you aren't one of the Top 45 or 50 teams in the country, you don't deserve an at large bid anyway, so quit complaining. If you aren't one of the Top 10 teams in the country in football, you don't deserve an at large bid, and it's your fault you didn't get there through your autmoatic bid, so don't complain about it.
The automatic bid teams earn their way through a different path, and they have a right to be there because of that. No one says they are among the best 68, or in this case 16, in the country. And yes, if you finish 8-4, and Houston won CUSA, I would have no problem seeing them in a playoff while you go to a bowl game, despite the fact that you beat them.
They aren't going to win it anyway, so what does it matter? They serve the purpose of getting the CUSA fans something to watch and something to play for, and they serve the purpose of offering up an easier match up for the top seeds. I really don't see how you don't get that.
The proposal Sesh made, which is the one I also like, is not calling for the Top 16 teams. It's calling for 11 auto bids and 5 at larges, just like the NCAA tournament. There is nothing wrong with that format.