I wouldn't get too hung up on this business about failing to be selected looking bad. Failing to apply for sponsorships would look worse, don't you think? All airline recruiters are aware of how difficult it is to get a place on these schemes, and won't hold it against you if you haven't been lucky (because luck is most definitely involved!).
There have never been that many jobs available to wannabes; the market now is no worse than it has been on average over the last 20 years. In many ways, it may be better. There's evidence that there are fewer wannabes these days, and the number of jobs to be filled is gradually increasing in line with the inexorable increase of air traffic.
In fact, our own Hamrah has suggested that, in 2003, somewhere around 400 pilots will be required by the low cost/IT sectors in UK. I personally suspect it will be fewer than that, but not by a great deal. What is certain is that 2004/5 will see rapidly increasing opportunities for low-time pilots as the economic slowdown and war issues fade and the world gets travelling again.
However, you're right to suggest that the ideal route to that airline cockpit may be changing. It seems obvious to me that the CTC McAlpine scheme will spawn imitators, as the airlines realise that they are likely to get higher-quality (and thus cheaper to train) candidates through a formal training system. Schemes like this will, eventually, largely replace the ad-hoc hour-building route that has been the staple for airlines over the last 50 years. I think it's probable that such schemes will be open to self-sponsoring students, but they will still require selection by the scheme operator.
However, I think that widespread use of such schemes is probably still a few years away!