There is no perfect way to do it. That's why I'm a big advocate for a B team and rarely, if needs be a C team. I coached a B team this year and we beat several A teams. We just a had a good league and I could see the writing on the wall for several good players who weren't going to make the cut for the A team, so I got out ahead of it and advocated for a B team. We always finished right behind our A team in the tourney.
From my experience though coaches kids are generally in the mix for best players on the team. So it's hard for them when they have to give names from their team. Not the best way to do it, no, but surprisingly common.