I do not like the idea of a challenge match. One kid just lost a match in the finals and the other kid is just coming off a win, who do you think has the adv.? I have seen it from all sides. At USJOC my son was the #2 seed and took 3rd. He challenged the kid who took 2nd (#1 seed) and lost in a close match. At Middle School State one of my wrestlers took 4th then was challenged by the kid who took 5th (who had beat him earlier) and lost and then did not make the KS National Duel Team. At the same tournament another of our wrestlers took 5th then challenged and took 4th and made the team. Until they have a challenge format at High School State Tournament we should keep it as is.
Now, if you want to seed the State Tournament that might be an idea. Start with #1 vs #4 then seed the rest of the bracket.