I think you're completely wrong. Winning an 8th grade tournament is great for the morale of the club and helps bring positive recognition to the club program. Winning tournament history is on every club home page for prospective players to see. The better players are going to gravitate to the winning programs and the programs that can't keep up end up folding. Winning does help attract younger players who are the foundation for the older club teams. Issue is Madlax 2020 doesn't seem to have the ability to attract the strongest 2020 players in the geography. If Madlax 2020 wanted to be able to compete in the elite HOCO league they needed to figure out a better way to attract the top players. You are right, nobody does care about who won an 8th grade tournament in 2yrs, but what does matter is losing games/tournaments detracts the young players from trying out for a losing club.
I agree Madlax is having trouble getting the best players. I think the crazy owner story has trickled down to all the youth. And now its so old no one really knows the real story so it looks even worse. But the crazy thing about your winning tournaments theory is Madlax 2019 has something like a 900% winning percentage. So using your logic every kid in the 2020 class should want to play for the Madlax program.