I've been mulling this over for a minute, and here's what I've come up with:
Option One: Everyone Gets a Share
Instead of picking one option over the other, just differentiate them. Give regular users the ability to "Luv" individual posts. Since most threads are made up of a few great posts and a lot of bullshit, this would help keep the two from looking the same. Just make it so there has to be x number of Luvs for them to start showing up so people don't rape the system.
Stars, too, could be handled that way. If a badgeholder thinks the whole thread is great, it gets a star (no five-star vs one-star piddly fights), and as the number of badgeholders who star it increase, so does the number of stars. If an un-star feature is needed, just make it so it takes x number of un-stars to equal a regular star (if a thread is really bad enough to get one star it won't be just one person un-starring it).
This option keeps the masses happy, gives the badgeholders the elitist separation that we all love oh-so dearly, removes the bitching and moaning this whole thing has fallen into, and offers people a clear-cut way to discern between the meat and the fat in a thread.
Option Two: Mod's Discretion
I always assumed threads that could earn a five-star rating should be first-page threads, but apparently that's not right. If a thread is really all that people are saying it's cracked up to be, the users who moderate the forum would know better than anyone else (that badge they have means they're reading every post of every thread, right?). It's these few users who should get the chance to highlight the threads that are a cut above the rest, not the uneducated masses (other badgeholders included).
The mods of each subforum could have a weekly (arbitrary value) meeting on IRC to talk about the threads that are receiving the most attention and vote on whether or not they should be given special status (such as, moving them to a forum where only other threads of that calibur exist). People could still post in them, but they're distinguishable from the threads not at the same level of pertinence.
Then the next week they can discuss whether those same threads are still as useful as they were before and decide whether to move them back to the rest of the forum or if they're still great enough to be kept in that special group. This'll keep things from getting backlogged, give users the ability to differentiate between great threads and shit threads, and streamline a process so that great threads can be put in Thread Cryonics (which I believe should be the final destination for any threads that were five-star worthy).
Here's that option in a flow of events:
-Thread is posted
-Thread gets popular, pertinent, and informative
-Mod A notices the Thread
-Mods A, B, and C vote on whether or not the thread is worth highlighting
-Thread is moved to a "Best of the Best" subforum or is left alone
Those are the best options I could think up, but they're still probably going to be the root of a lot of whining. No matter what happens, I just hope it gets put to rest quickly so the administration can move on to more important things.