I'm with gametaker on this one. Let's say 1 and 2 are in a match. 3 and 4 are in a match as well. 4 beats 3 so now the previous 4 is wanting to challenge whoever loses the 1 vs 2. Let's say that player 2 is losing. All he has to do is stall the match a week so 4 can challenge 3 again. Then 2 can go ahead and lose because it's pretty safe that a week will pass before anyone can challenge him again. At that point 2 is pretty safe to never get challenged if he plays it right.
This is a complex problem, but even if it slowed gameplay I'd like to see someone have a chance to advance before defending again.
The reason I feel this way is the list is supposed to be a comprehensive list of the current top 10 players in the game. The current rules promote who is good at the game, but also who is good at manipulating the tournament.
It's a tough call that could go either way but for my vote I'm with game taker. Maybe you could make a compromise and say after 2 successful defends, someone could be safe until they get a chance to challenge.