I think your edit2 makes a lot of sense. In terms of implementation pain, it could shift the "unfair" feeling from the other team over to ungrouped teammates, but I think it's worth the potential headache there because it lets friends play together.

To illustrate my point:

** Season 1 System ** Player|Individual SR ---|--- Player 1| 60 Player 2| 62 Player 3| 62 Player 4| 38

At an average of ~55, they will be matched with two more 55 team members, and against a team of average 55. Depending on player four's true skill, this may be unfair to the team of 55s, who are actually real underdogs. Six people who are not part of the original group feel that the game is "unfair."

In your proposal (using S1 ranks for simplicity) the average SR of that team would be 59, once you push the 38 up to a "floor" of 52. They would be matched with other folks of 59, which seems a lot better.

Things could get a little more unbalalnced if a mismatched group of two plays, though. Say a 70 plays with his friend who is 50, and they join a group of otherwise 65-ranked players.