[fowlplay4]

Well the basic idea is:

Have a player queue script, when the queue is full, create the matches, warp the players in, have a loop scan the players until one of them is dead, add the winner to a list, warp the loser to OSL, the winner to spar waiting room or whatever, then continue with next match, continue till there are no matches, then re-create the matches with winners, continue the same process till the winners list is down to just one.

Of course you'll have to add some other things to make for a better player experience, to prevent AFK people and so forth.

Should probably draw a diagram/flowchart, to get a better idea of the "big picture." MS' Visio is good for that.