You are correct. It should be settled on the field and if you lose most of your games on the field you shouldn't be rewarded with a playoff game.
In a perfect world, everyone would like the playoffs to be just for those with exceptional records. The moment the TSSAA decided to use it as a fund raiser more teams had to be included. Therefore teams with losing records had to be included. Lets just accept it for what it is. The first round is nothing more than a TSSAA benefit with the important games starting in the second or third rounds.