The best way to handle cross-server matsuri is for it to be an opt-in system with incentives for participating in the cross-server element. For example, when you queue you can check a box that says you want to be matched with people from other servers or you can decide to not check the box and * with only your server. This is ideal for several reasons.
1. This gives players on newer servers more incentive to participate since they wont necessarily be matched with people stronger than anyone on their server.
2. At the same time, it gives people on low volume servers or those who want more of a challenge than they can find in their server the ability to play people from other servers.
Admittedly there is one potential issue: if given the choice many people may not risk cross-server because they are strong in their server but not very strong in the game as a whole. However, I think there is an easy solution so that everyone wins and matsuri can be at its best. The solution is to give a small but enticing reward for people who participate in a certain number of cross-server matches. For example, just like we currently get a reward for being in three matches in matsuri, there could be a reward added for being in three cross-server matches. This would be a win-win situation because people could get the regular matsuri rewards within their server without any disruption but would still have a reason to queue in cross-server matches to get the additional rewards.
Furthermore, the addition of this feature could be a way to remedy other issues that have developed recently. Several players have commented that the removal of mood scrolls from the group wheel was a negative change. A way to reintroduce mood scrolls into the game would be to make them a cross-server reward. So, if you participate in 3 cross-server matches you get say 5 seal fragments and 1 mood scroll.
This seems like it would be a way to make the maximum number of people happy with matsuri. People who are doing well in matsuri within their servers can continue to do well, but still have an incentive to be a part of the cross-server element that will cater to those on low traffic servers or people seeking extra challenge.