There will always be a controversy about who is selected last, and next year, probably next to last, and then the order (as 5th will be tougher than 4th).
I don't think they take injuries into account, just performance to date. So, yeah, undefeated P5 teams will always be ahead of one losers, always, with perhaps a very unusual exception. I was thinking about Ohio State a bit, playing on the road basically even with the #2 team in the country, and how they'd get dinged down to 6-7-8 for it.
A better way would be to let Vegas do this, but that can't happen.