I'm always a bit intimidated by people who talk with such authority, I guess I take people at face value to easily, but what you say here Guitar Jim appears to me to be a whole load of cobblers (and I mean that in the nicest possible way - I'm not looking to start a slanging match).
Now it's possible you're a mathematical genius or know of things I don't but on the surface I can see little logic in what you say.
Why can't a strike rate of 43%, or any other percent for that matter if the average divvy is right, produce a permanent POT of 21%. Without knowing more about how his system works I don't see any way you can make this statement.
Why should a 43% win strike rate be accompanied by a lower than 82% place strike rate. To me that seems very reasonable. If he picks the winner 43% of the time he has 57% of races left. If he gets the next best horse in 43% of them that means he is 1st or second in 43 + (0.43 x 57) = 67.5%. If he gets the next best horse in 43 % of the remaining 32.5% of races he has 1, 2 or 3 in 81.5% of races.
Finally you say use the system and if you are winning at the end of a set period stop using it. If he is only a dollar ahead maybe yes, improve it if he can, but if he is well ahead keep going. That's what the system is for.
What I do agree with is start betting small. I've tested systems with dollar bets. It makes it so much more real. There is no saying I would have done this or I wouldn't have done that if I was using real money - which you can say if you are playing on paper. If you make 20% using dollar bets there's no reason you can't make it using bigger bets (nerve and personality not withstanding).

Anyway, sorry to be so disagreeable Guitar Jim. I wait to be enlightened as to your thought processes. What sort of guitar do you play? I've got a Strat.

KV