is the issue that it's not using the level 1s as the first priority? But yes, lots of issues with Instant Rank Up

I have 10-20 totally unleveled 2 star toons that could be picked as the rank-up food, but it constantly picks food toons that have been ranked because of how it is programmed.  

No actual player would use a L19 2-star toon as rank-up food, and it would be an easy thing to fix, but this has been broken since it was introduced.

Yes its terrible.  Not being able to brew multiple champs at the same time is also miserable.  They have said in the past more Tavern improvements were planned but haven't heard anything about it lately.