I don't think the question here should be whether or not the current method is unfair, at least from the standpoint of the tournament itself. It's not really questionable that the wrestler sitting in the finals has a physical advantage over the wrestler who has to go through the challenge tournament. Consider having to wrestle multiple NCAA-champion caliber wrestlers over the course of a long day, win all those matches (four or five, let's say), only to face the toughest of them all who has had all day off and have to beat him twice. It's not debatable that the wrestler in the finals does have an unfair advantage in this case - the body of the wrestler sitting in the finals is in much better condition. Anyone who has ever wrestled at a moderately competitive level can attest to the fact that wrestling four or five matches takes a large toll on your body (plus all these matches have been against the best wrestlers in the country). To say that the wrestler sitting in the finals is not working from an advantaged position is, to me, not a legitimately arguable position.
The question is whether or not this unfairness is okay. From Dake's perspective, it is not; he is an equal competitor who should be given a fair shot at the championship, or at least one that is more fair than the current system provides. From USA Wrestling's perpesective, it is; this system is conducive to putting wrestlers in the lineup who have previously shown the best results, and thus (in theory) will help the USA have better results in the future.
My stance on the issue is that it's fine to give a defending medalist an advantage - HOWEVER, I do not think that it is fair for this advantage to be a physical one. Imagine telling the competitor that sure, fine, you can wrestle the defending medalist for the spot, but you have to do it with a three pound weight strapped to your ankle. Not saying this is a perfect comparison, but it's still a somewhat similar physical advantage, and to me, that situation just feels wrong. Personally, I don't see why USA Wrestling wouldn't have the challenge tournament one week, and then wrestle the best 2 out of 3 the next weekend between the winner of the challenge tournament and the defending medalist. The defending medalist still has the advantage of not having to make it through a brutal domestic mini-tournament, but he does not have the physical advantage of wrestling someone whose body is, by any normal standards, close to exhaustion.