Hi niko,
Right now players out of contract were not taken into account for the Cup average quality calculation, this will change now.
Regarding the scenarios your presented, I'd say the 2nd is the correct answer, but I am not totally sure. I'll have to get back to you about this specific case.
About the teamlevel differences in competitions, again the issue is the same: teams are not unlimited in every server, for levels where there are not many teams, we have to make the cut somewhere, and we're always going to need 128 teams for every Cup. But, as you know, we're always trying to improve the game as much as possible, so expect improvements in competition generation in the upcoming seasons