A system where you set up your game options (1v1, 2v2, etc.), game mode (stock, time, coin, or any), item settings, and stage settings (i.e., which are allowed for random).
Then you pick a stage, either a stage, or random. Then the system searches for someone online whose settings:
Have some overlap with yours for stages
Are mathematically close to yours for items
Then it picks a stage in a fashion agreeable to both persons' stage settings, and goes by the least permissive item settings.
About stage selection: If you pick random, someone is compatible with you only if they picked random and you allow some stage which you also allow, OR they did not pick a stage which you disallowed.
If one player didn't pick random, it's that stage. If both picked random, it's random between all stages you both allow.
This is for Basic Brawl.
For brawling with Friends, what they have is good, except controlling game settings would make something like sense. (Why the #$%@ can we not? Really? They specifically made that difficult for us...)
I'd make a statement on lag, but what can I say other than "I hear there's no good explanation for why your Wifis are suck, Nintendo. Good job."