Every TI champion there has ever been as come from the Upper bracket. So, I would say BO1's are working as intended.
You have to thin the herd and they are incredibly exciting. Having been to TI twice, it was my favorite day of the tournament. The game itself is worth $168,000 which seems like a lot, but it is only a difference of 0.5% in the total prize pool. I would like to see them take another 5% off the top of the winners and divvy it up to the 7th - 18th places. That extra $2m would go a long ways towards supporting the long-term health of a lot of teams.