No one has ever claimed that a 95% Confidence Interval means it's perfect. 5% of the time it will be wrong period dot. It also means your skill is across a range of values, with the higher the sigma the greater the range. So in order to increase the amount of times it gets everyone's skill level right (99%, 99.9%) you have to open the range of values it falls inside and it becomes a balancing act between your confidence interval range, the time to achieve results, and the accuracy to predict game outcomes, the REAL goal of the endeavour btw.
The claim that is being made is 80% of the time AllegSkills can predict the outcome of a game. Based on this it develops a listing of players per team to achieve the maximum balance possible using Mu and Sigma. Some days we play better and other days worse, this along with pure random chance means this is about as good as it gets since we aren't milling machines but human beings playing a game.
RANKS are for the great unwashed not AllegSkill and it's math. What would be best is for the community is to have the Allegskill version of autobalance on since it intelligently uses Mu and Sigma to balance games. BUT given the miniscule size of this community, we can not do this since there would be a wholesale revolt. I get it since there are people I simply won't play along side just like you. So we have to give the most accurate RANKS so commanders have as much info as possible to pick fairer teams. They aren't wrong just the best try at getting five lbs of info in a single number so the players have something to measure against.
I'd LOVE to have an intelligent discussion about things since there a number of grey areas on the implementation end IMHO (not they are wrong but there are some knobs you can tinker that may be beneficial in other areas) but mother $#@!er we can't get past giving the ranks $#@!ing names

The change isn't arbitary but rather essential since it's artificially supressing rank CHANGES.
Go buy "The Dunkard's Walk. How Randomness Rules Our Lives" by Leonard Mlodinow who does a superb job of trying to explain why intuition, and mental gymnastics don't work when dealing with randomness and probability.
edit: While I am a little annoyed with Cashto, just a little, I did not write this response to him rather it's a generic one given we have this kind of discussion over and over and over again. It makes one defensive and poopie. It kind of like quesitoning Thalgor about the donations a while ago. It's insulting to him and come to find out he WAS a good guy. Hmmmmm wonder why Baker and TE keep putting off these changes