In my opinion, they need to go full one way or the other otherwise both will fail. No one will play matchmaking if they can pick a lobby instead, it is much easier to cherry pick opponents in a lobby, also if you're matched vs someone better it's just 1 loss and not 3.

If they got higher elo lobbys no one will ever play the matchmaking function. But because of the low elo lobbys no one does play the matchmaking currently like you said. Hope this makes sense, imo they should have it only matchmaking and get rid of the lobbys. (If they cant get matchmaking to succeed then something else would need to happen, e.g. start up ranked lobbys)