Dedicated servers with a server browser and competitive matchmaking (plus ladders) can co-exist. See CS:GO for example.
My Feedback
While I agree with you whole-heartedly with regards to tiering matchmaking to create as many close games as possible, I believe that sometimes people just want to hop in a server and play.
I am going to make a post to describe this a little more accurately.
[QUOTE=FireWater;472133]While I agree with you whole-heartedly with regards to tiering matchmaking to create as many close games as possible, I believe that sometimes people just want to hop in a server and play.
I am going to make a post to describe this a little more accurately.[/QUOTE]
That’s why you have both options and everyone’s happy 
I really do like the CS:GO matchmaking system, though it had the benefit of an established audience.
I think starting with a very simplistic system would be best, having users be able to “choose their difficulty” is a good way to go. This has worked well for War Thunder.
In War Thunder you have Aracde, Historic, and Full-Real battles. The rules are the same, but the controls and physics are much more complex, and people take the game much more seriously. The rewards for in-game currency are also much higher for winning the higher tier matches. XT could establish this idea with changes to the rulesets rather than core concepts.
I love dedicated servers, I really do. I’d love to run one for XT if they are available, especially with the Reddit community. If the game has excellent social matchmaking functions (easy and rewarding to add players to a “play with/against/recommend/avoid” preference), that would really modernize the experience for me. I don’t mind getting stomped, as long as the players killing me aren’t total jerks.
I like how valve did CS:GO, choose whatever server, or for competitive, bring as many people as you want or go solo. I often find the matchmaker effective win or lose, I’ve had very few blowouts either victory or defeat. I have Master Guardian 2 rank, which I think means I am in the top 15% globally.