Why G5 Teams?
IMO, if you are willing to fund a football program at your university, then you should have the following statement be true: If we beat everyone who is put in front of us, we are the national champions.
Why have at large teams?
To counter balance the auto-bids. If we go to five at-large bids, the balance of power in the playoffs will be to teams that are very good. Just like in March Madness. The small teams theoretically have a shot, make it fun, but the balance of power is to the P5 teams.
Why have 16?
There are 130 FBS teams. I don't think 12% of all teams making the playoffs is a high percentage. Compare that to other major American team sports, including March Madness.
What's the Point?
Fundamentally, you are saying that if you are willing to field the team, we will structure it so that if you go undefeated, you are the national champion.
Because people like playoffs?
Is no playoffs and two polls voted on by coaches and journalists a better way to declare a national champion than playing on the field? I don't think so.
One note, I was wrong in my initial comment, there are 10 conferences. So you can do either 10 conf champs + 2 at-large bids or 6 at-large bids with byes. Either way, top four get either a one round bye or two round bye.
Also, if we can stop pretending that schools and fans really care about the student part of football players' lives, let's at least maximize the profit that can be made, make more money for everyone (including the players) and set up a real playoff. No top draft pick is going to play in meaningless bowl games more and more frequently. Let's make real change, give everyone at least a theoretical shot and make it one of the most fun four weeks in all of team sports.