So while I agree @fishbane brackets makes more sense, who does the current method hurt more? The bye who has a tougher semi draw or the 2 seed (really the #3 guy in the bracket if the bye is #1) who only gets one chance (not 2 out of 3) to beat the bye/#1 guy.
I actually they think they should seed the bye and if bye earns the #1 seed then the bracket should be like Fishbanes proposal. The only reason I can think of not doing it that way is if the guy who earns the #1 seed isn't the the returning medalist. Give the returning medalist the bye but if that guy didn't wrestle for a year and someone else has been going to international tournaments and winning/winning the US Open, etc. an argument could be made that they should get the 1 seed over a guy who hasn't competed in a year. (No one has done that so it wouldn't apply this year, I am just trying to think of reasons why the current method makes sense).