I don't mind losing against someone who is better than me because I can learn from my mistakes and become a better player.
The problem is losing games when lag gets involved. These games are pointless because it's impossible to know why you lost! Many people use lag as an excuse for losing but really it just stops you from seeing the real reason for the defeat.
I know matching people purely on connection would be problematic for newcomers and poor players but being able to see where you are going wrong is surely more important?