Johnny 7 there are bound to be fewer wannabes when jobs are few and far between - and the industry itself is looking a little sick - but I don't think that outfits like Oxford have been short of customers in the past. I do believe that the public perception of our profession - if you can call it that - is changing, and not before time. There's a very good thread on Aircrew Notices where various pilots describe their working days. The number of disillusioned, fed up, overworked and underpaid pilots is increasing rapidly, as that thread shows, and that will have ramifications for recruiting.
Let's face it, train drivers, taxi drivers, policemen above sergeant and soon all firemen earn more than a regional pilot, and they have better protection against unscrupulous working practices, better pensions, and more predictable lifestyles. Airlines and air travel are often the 'villain of the piece' in the media, especially the Daily Mail, and it's not much fun if you're on the end of the stick the public can give you on, say, a day when French air traffic is on strike. The appeal of aviation is rapidly withering for many.
carb yes, the quality of all wannabes is variable, as you would expect. Those that self-sponsor through training are somewhat more variable than those who go through a selection process - again, as you would expect. These facts have always been so. As for recruiting being a meritocracy, that entirely depends who's doing it and what methods they use. Many smaller outfits can't afford to run open recruiting competitions, and rely on word-of-mouth recommendations from those already in the company. Even in large companies that recruit from the pool of experienced pilots, having a good reputation is as important - maybe more important -as doing well at interview. That's true in many fields. However, most airlines recruit entirely through a process of practical and theoretical assessment at interview and simulator. Of course, the assessment of whether a process is meritocratic depends on the observer's point of view. The 'merits' required to be a pilot in any given company may be far more than just a licence and a desire to do the job.