I'm going to give the stone a few rotations, then put this particular axe away for a long, long time, so listen up, you lovable knuckleheads.
CR/EL/etc.. is/was an attempt at providing a mathematical way of reasoning out what a decent encounter should be. It was based on the idea of an encounter with a CR equal to party level should consume 20% of the party's resources. I find a couple of problems with that line of thinking:
1) Party composition varies wildly, so the numbers may not crunch up cleanly. Theoretically, the classes are balanced, so you should be able to take any four characters (yes, 4), and you should get the same results. The CR system is based around a party of 4, which may or may not match your situation. Also, it seems to work best when the party is built in a pre-fab 4 fashion: Fighter, Cleric, Wizard, Rogue. Your mileage may vary depending on party composition.
2) Consuming 20% of a party's resources may or may not constitute a challenge to your group. Unless my 3.5 group is flayed to within an inch of death, those arrogant ding-a-lings think the encounter was a cake-walk! Other groups may find that chewing up 20% is too much. Again, your mileage may vary, offer void where prohibited, blah, blah, blah.
Anyway, my point:
Game balance comes from the DM assessing the party and tossing out encounters which challenge them without making them despair or feel they have not even a remote chance of surviving.
It always has been this way, and it always will, with or without the CR system.
Of course, this means that there must exist a certain level of trust between the DM and the party. The DM should be concerned with challenging the party, without mauling them. The Players should trust the DM to not be out to add another notch to his DM screen. Sometimes, the DM will get it wrong. Often this results in character death. It happens. Good thing it's just a game.
Now, the CR system can be a handy tool for the DM to gauge encounters, or it may not be. It is hardly the be-all end-all that many believe it to be, and encounters the DM desgins need to have a sort of sanity check run on them to make sure they meet the goal of the game: Have fun.