The rule in question is very limited. Elites in the United States range from Simone Biles to 11-year-olds who earned 48s a few times and a magic 50.5 once. While no one wants to see an amanar at regionals, a low-nosed full yurchenko splat by a child under 5 feet tall shouldn't strike fear into the hearts of thousands.
USAG only allows two kinds of "elites" to compete at JO Nationals.
The first type are former elites who tend to dominate and are on their way to hardcore NCAA careers. They have every right to give up their elite status, adapt their routines, and compete head-to-head with the best JO athletes. Sr. C-Sr. F are like mini NCAA competitions and, if you want to compete NCAA, there's nothing wrong with competing on this playing field while in high school. Excellence creates more excellence.
The second type are brand-new elites who qualified for the first time in the weeks or few months prior to JO Nationals. I think two senior elites competed at JO nationals this year and they did very well. Around seven competed in Jr A and B with highly mixed results. Gymnasts this age fall a lot and are still learning. It seems unfair to say because they scored a 50.5 at one meet or camp they should not compete against other athletes their age who are similarly learning.
It is wildly important to qualify to JO nationals multiple years before the end of sophomore year to be seen by college coaches. Some club gyms do not attract college visits, and it's expensive to attend NCAA camps or big invitationals. If these baby elites truly dominated regionals and JO nationals - as if they might competing in a level 8 meet - maybe the rule should be re-evaluated. The truth is they don't. They do well, but qualifying elite in the weeks before or after JO Nationals does not transform them into Simone Biles. Also, the rule only applies to their first year elite. No gymnast will be knocked down to 8th place at regionals by the same gymnast multiple years and the vast majority of "elites" in this situation are in Jr. A and Jr. B.
The USAG rule which states a gymnast is not an elite until they compete at a Classic seems sound to me, as does the rule an elite who competes at a state meet is no longer an elite that calendar year. Regional imbalance seems the bigger problem to me than a handful of kids trying to catch their jaeger for the first time in a meet.
As an aside ... there are around seven bites at the apple to qualify elite in a given year, but only two (and rarely three) chances to qualify as an elite to Championships. The Classics are brutal meets. Nerves are strung super tight, one rolled ankle or illness takes you out for the year, and routines which used to score X instead score X minus .5 because E scores tighten. Any rule or schedule which discourages elite-qualified gymnasts from competing at every Classic for which they are eligible to compete is a bad rule. Love Championships and love JO Nationals, but I'd rather eat a bucket of worms than sit in the stands watching my children compete at a Classic meet or JO regionals again!