I'm a first level brown belt right now...(no stripes...some call this first degree, some call it third)... I am not a black belt and I don't have the skills of a black belt. Were I forced to compete at a black belt level, I'd get my *** kicked, plain and simple. Brown belt divisions are about right for me, since I win about half the time. My skills are brown belt level.
the problem with looking at the amount of time someone has been training is that everyone learns at different speeds. It takes me FOREVER to learn something new...for those of you out there who aren't teachers, there are three ways of learning...by hearing, by seeing, and by doing, and although everyone can learn in any of the three ways, there is almost always one way they are really good at. karate requires that you learn by doing, as its physical. I, however, learn by hearing, so I can TELL you anything about how a technique has to be done, but I can't always show you. It takes me a very, very long time to learn a new kata or technique, or whatever, but once I've got it down, I never do it wrong again.
I think belt rankings are probably the best way to go, because it doesn't matter how long you've been doing it...if you're slow and just don't get it as quick, you're in a division with people at your same level.
I think some kind of national rank registry might be a better option. all the schools that are members, as soon as they promote someone, they report it, so there's no brown belts wearing yellow belts because they want a trophy.