My Perfect Battleground System

Of course a perfect MMO would use instancing only where necessary and there are quite a few ideas about how to make good PvP without instancing. But for the moment let's talk about instanced battlegrounds - and how to embed them into a fun system.

My perfect battleground system has these properties:
1) If I am better I start to win more often.
2) Winning is helpful for improving my character.
3) Improving my character is very limited. There is, however, no cap. Every single win helps.
4) No complete anonymity within your own 'faction'.
5) 'Harcore' and 'Casuals' fight along each other.
6) You are able to play with your friends.

So, how do we do this?
1) You are required to create a 5-man group before the BG starts.
2) The BG system merges those groups of 5 'friends' randomly and thus creates the one side of the battle. For example 8 groups on each side for a 40-man BG. The BG size is varible!
3) If you win you get points. If you lose you gain no points.
4) The points an individual player can earn per day/week/month diminish drastically the more he gets. Use some "x to the power of 1/y" type of formula to achieve this.
5) The points can be used to improve your character (e.g. 'buying' gear).
6) There is some time to talk with each other before every battle. Battles last long enough that this is kept in perspective (at least one hour).
7) If a member of a group goes offline, the entire group is kicked from the BG after a minute. Groups can also leave a BG. No penalties apply. Either way, if the BG is won later on, they get a portion of the points depending on how long they participated. The entire group is replaced by another group that is also rewarded depending on how long they participated until the win. Nobody gains any points if a BG is lost. The new group members spawn near the location in the BG where the old group members left. There is a minimum amount of points you can get if you won, but left before. If you participated for only a few minutes you cannot gain any points.
8) Capitulation is possible. A voting can occur only a few times during a BG and is initiated when 1/4 of of players on one side mark a respective checkbox. If at least 3/4 of the number of players vote 'capitulate' the winning team gets a small(!) bonus to their winning points. The losing team doesn't lose anything, but is now able to queue for a new BG.

A few remarks:
1) Communication between groups will usually be some kind of Teamspeak. Since battles last long enough it is possible to have some preparation phase where team members exchange e.g. TS server data. Ideally, the MMO would offer a good system that would be used.
2) The two-stage system allows friends to play together, but also joins hardcore and casual groups. It is in the best interests of the groups to discuss their strategy before the battle. It is a major component of the battle and supposed to be fun ;). You would want stronger  groups to fulfill more important tasks in battle or join weaker groups to achive objectives together. The preparation phase lasts no longer than 10 minutes, but can be ended beforehand if every player marks a checkbox that says 'ready'.
3) This has been written with Alterac Valley in mind.
4) Clarification about the replacement of groups. If your group quits the battle for whatever reason two things can happen:
a) The battle is lost later on. In this case they do not gain any points.
b) The battle is won later on. T is the total time of the battle. N the time the group participated in the battle. They gain N/T of the maximum points. Due to the lower limit of points it makes no sense to join a battle and leave a short time after.
5) Capitulation: A few minutes in the battle you realize that this is hopeless. But you don't have to afk. You check a box that says capitulate. You ask other players on your team to do the same. As soon as 25% of the players checked the box a vote starts. You vote yes. If 3/4 of the team also vote 'yes' your team capitulates. If less than 75% vote 'yes' The next vote is started in no more than 10 minutes. The winning team gets a small bonus.

I conclude with a remark about rated systems: Most people want to win more often if they are better. A system that pitches the best against the best and the worst against the worst creates 50:50 matches all the time (if it works). That is great for sports and making a ranking, but bad for fun and immersion. Winning generally feels better than improving a number.