I see your point, it makes sense. Many support in a similar manner that the European Soccer cup (UEFA) is more competitive than the FIFA World cup because the teams are on average stronger.

Still, what should be measured to my mind is "Given a specific team (any in the world), what's the probability of it winning the event ?", and then you average over all teams.
I also think in this regard that Masters = Champions, but if once you take into account that it is harder to get to Champions in the first place, then winning it is less likely whatever the team. That's what makes it "more competitive" to me.

The "paradox" is that although more teams in the event means weaker opponents on average, it can still only decrease your probability of winning. The reason is that on top of not being upset, you also still have to beat the good teams at the end of the tournament.

Could've been interesting, if only you had not considered LOCK//IN and Champions as less competitive.
More teams does NOT make it less competitive, at least as long as the best teams make it into the event. If you've got the best teams on top of many "lower" contenders, your probability of winning is simply lower than if only the good teams are present.
An argument could be made for LOCK IN because it was single-match eliminations all along, but you didn't mention that.
Finally your post looked all serious and all until the last two paragraphs.. why, really ?

Yeah, clearly NA outperformed latam and brazil in the league.. lmao

Damn

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