Powder - I think you have it about right. If you were playing a 10 in a race to 7 tournament, you would go to 5. If you were playing a 10-2, you would go to 3, he would go to 7. Just depends on the tourny format.
The AZ rating system sucks out loud. it is purly subjective, and should only be used as a baseline when matching up. You are right about there being a ton of 6's and 7's in az. Mostly the 9s and 10s end up playing each other alot, but the 10's will give serious weight, because they have a hard time getting action.
here is my opinion of how the ratings break down:
A six is going to miss 1-2 shots per game of 9 ball. Thier Cueball control is not where it should be yet, and they don't recovgnize patterns as well as they probably should .
A seven is a little stronger on cue ball control and pattern recognition. A 7 should run a rack of 9 ball with ball in hand and no real trouble clusters maybe 60% of the time, and tougher racks 30-40% of the time.
An eight should be able to run a rack of 9 ball with no trouble balls and ball in hand more like 80% of the time, and a troublesome rack 60% of the time. Good Safety play and few mental mistakes.
The difference between an eight and a nine is safety play and decision making. A nine will play excellent safeties, and will run out if he gets a descent shot.
A 10 is about 6 months of solid work on thier game away from the pro tour. Everything a nine has, plus the ability to kick-safe you back. If a 10 can see the object ball directly, your probably toast.
Those are my rules about what I EXPECT a player of a given ranking to play like, and what I use to set the weight when I am playing someone I don't know (but I know thier handicap ranking). There are pleanty of sandbaggers out there, though (I can think of 2 sixes who are really solid 8s off the top of my head), so be careful out there.