In my state for L5 and up, they did USAG. Made for some pretty uneven groupings! There were something like 26 young L5s (ages 7-8) but more than 50 in the 9-10 year old age group. I think the older age group was about the same as the young group. It was even more uneven at L6, where the youngest age group (7-8) only had a handful of gymnasts. They did placements as a percentage, though I think they gave out more places for AA than for individual events.
Skschlag, I think your question is quite interesting. With strength and size being such an important factor for the boys, particularly as they are getting into ages where puberty's a factor, the age groupings probably do make a difference. I suspect that a lot of boys in our area tend to drop out when the hours start to climb precipitously, which happens right as they are transitioning to optionals. Actually I am a little concerned about the new system -- I understand the reasons for slowing things down and making boys wait to get to optionals, but at least on the girls' side, getting to optionals is a real goal because it's much more fun to do your own routines.
We aren't anywhere near there yet, but my understanding is that at our gym, the optional boys do a lot more strength and conditioning work. While there are ways to make that more fun, I would guess it's just not as inherently fun as doing crazy flippy things on high bar, floor, or parallel bars. But I would agree with you that the best compulsory gymnast isn't necessarily the best optional gymnast.