Not in my discipline (law) where the standard offer remains AAA and they use the same admissions test as us - but since unis which use this admission test can decide for themselves what level they want students to attain on it (i.e. what the notional 'pass' mark is) we are back in scenario A. In practice they probably fall in the group of unis which exercise more discretion than us but not masses.
And since Oxford regularly gets hammered for failing to admit enough students from minority ethnic groups, or state schools or whatever I'm not sure the 'no ill effects' statement is accurate either. I am sure they get the brightest and best students. I am pretty impressed with the students we get too. Getting bright students is not hard. Getting bright students to apply and get accepted from every sector of society is hard. I don't think anyone at Oxford is complacent about that.
One thing that I think helps is communicating that the process is transparent and if you have good grades and perform well in admissions tests you'll get a place, that you won't be at a disadvantage because you lack work experience in chambers or chose Business Studies A Level. I think this because these are the kinds of queries I field most frequently in the UCAS filling in form period. Any process that introduces more discretion into the admissions process therefore gives the wrong impression and discourages applications - especially from schools which rarely send students to certain unis and where people may lack the confidence to send the admissions tutor a quick e-mail (I realise I keep referring to Russell Group on this thread like it is badge of honour, I don't actually think that, it is just a convenient shorthand).
But conversely without discretion we can't apply common sense to impressive applicants from seriously disadvantaged backgrounds - which there may be more scope for doing at Oxford.
Which is, as I say, an insoluble conundrum.
I'm not sure about the 'must well know' point either. I don't work at Oxford and have never studied there (did go to t'other place - perhaps that accounts for my deficiencies). I had to check out their standard offer online. If you aren't applying yourself why would you know?