EI,

I agree totally with your first point (best horse does not always win the race) - in fact as I generally only back $8-$20 runners I would probably say my system depends on this! Certainly the best horse on paper often doesn't win for the reasons you mention and a few others. One of the big problems for favourite backers is that many horses probably don't win because of things not known to the punting public (eg. training strategies where the horse is being prepared for a particular race and trainer gives instructions to rider not to ride it too hard, also things like minor injuries in training, etc). Also, like people, horses just seem to have bad days for no real reason! This is why I tend to concentrate on looking for value horses that can win if the better horse(s) fail for any reason.

Also generally agree with your second point (no rule set in concrete) although I am forming the opinion that I should not exclude horses that get included by my system but I can include ones that miss out if there is a good reason for it.