Pretty sure that was actually the original idea but it was scrapped to avoid collusion among other things. Should had been way worse yeah.Unfortunately, I think the main alternative was some stupid shit like 3-team groups or something. I believe there's been WC or at least Euros in the past with third place qualification but I guess with this amount of teams it feels slightly different. Though I have to say overall I think it's been great, but I guess a weird knockout phase could still spoil it.
The extra knockout phase means teams will have to endure an extra round of pressure and we might see some big names missing the semis because of carry over yellow cards. Since the 2006 wc the cards get cleared after the group phase and during semis (because Ballack missed the 2002 final and it was dross). So players would have to get carded in both rounds (top 16 and top 8) to miss a knockout match because of carry over cards, but now there's an extra round that can make it happen.
