So let me help explain and clarify a couple things for you guys. I spoke with a GM today who had some info on the topic:
Whether you have xp turned off or you are capped at your level you are defaulted to the xp off bracket that cooresponds with your level. Vanilla capped players are bound to the 60 brackets. BC capped players are bound to the 70 brackets. This was Blizzards work around to the issue of capped players exploiting the ability to remain at their respective "twink" bracket but fight players who are not equipped similarly. Today's patch did not merge all of the battlegroups as was promised by blizzard but this is currently planned to be implemented before cataclysm, coinciding with the beginning of Arena Season 9 and Rated battleground season 1.
So what does this all mean for us twinks?
1. Until season 9 begins and the merger of all battlegrounds is complete our battleground queues will be very sporadic and few and far between. Once we see the battlegrounds merged the queue times should really pick up and the real fun will begin
2. Deduced from #1. We will only be playing other capped twinks from now on. I am sorry if your favorite thing was getting 100+ kb's in AV but that's a thing of the past now. I personally prefer playing other 70 twinks instead of level 79 players in WSG and AB so i welcome this change.
3. The third and most important change and a genius move on Blizzards part to milk us of money.... The optimal level 70 twink will now be one with Cataclysm and XP off. Since it serves no advantage to play a capped account anymore you are better off getting the best professions and perks by having the last expansion. Sneaky sneaky blizz
If there is anything I havent thought of yet let me know.. But I think all of us who have called in to downgrade are kicking ourselves now and blizzard is laughing all the way to the bank haha.