Actually that ladder system was the one used in the first pvp tournement of the server, and I think it is the best one.
Problem is that this is on paper.
You need to have a 2^X number of players or it doesn't work. (i.e. you need 2, 4, 8, 16, 32, 64, 128...).
One way to solve this would be to say "the first 16 to register" will get to participate. Of course there would be a list of the 17-... registered people in case some of the 16 doesn't show up.
Also, a fee for participation, like 1 mil or 2 mil would help people to show on the day of the tournement.
And, of course, the amount collected would be distributed between the top 3, plus the usual prizes by gms.