About CRs and Iconics and stuff...
Very interesting thread...
I have been following the discussion and I must say that I LIKE the current CR system. As Monte clearly states in his post, this is just a baseline, and baselines should be used to calculate divergences.
It is natural for this (or any other) system to break down when applied to higher level enconters. The reason for this has been stated many times in this thread and can be explained easily using mathematical reasoning. As a party becomes more powerful and challenges progress in difficulty new factors such as special abilities, powerful spells, and magic items come into play. As the number of factors increases the formula to calculate the outcome of such encounters becomes more complex - exponentially. It would be possible to create a system that takes into account all these different factors to come up with one magical number that could be applied to adjudicate the difficulty level of an encounter. However, such a system would have to be changed every time a new ability, spell, or rule bending mechanic is introduced, therefore limiting the flexibility and expandability of the game. This is why the CR system abstraction is good enough for me.
I also believe the iconics approach to calculate CRs is correct as well. Sure, everyone will try to optimize their character some way or another, but I think it is absurd to ask the game designers to account for all the different possibilities in which this optimization can be done. Thus, as a game designer, you take a "middle of the road" approach - a group of iconic characters which represents the everyday party. As a dm, I feel it is part of my job to determine whether a creature rated as "CR4" would really challenge my 4th level party. In other words, I'm making a determination on how much more powerful my PC party is in relation to the iconic party. This is a classic use for baselines.
Now, if we accept the fact that CRs become less accurate at higher levels (because of the reasons mentioned above) and assume that all CRs are calculated with iconics in mind then we can come up with a divergence factor using our baseline (the iconics). This factor can then be used to approximate the correct challenge level FOR YOUR PARTY. I'm still not sure what could be used to make this comparison, but let me propose this (I'm sure someone out there can come up with something more simple) - take the average party level for your party. Take an averge of the ability bonuses for each member and divide it by the number of party members. If you want more accuracy, you can also average out BABs and saving throw mods. Multiply all these numbers toghether. Do the same thing for an iconic party of the same level and member constitution. Divide these two numbers up and you get a factor you can use to multiply to CRs. Bingo.
Just my two cents...