I've been giving this some thought for our club, but haven't tried any of it. Let me know what you think.
Use a chess board for up to 8 ladders, one for each file. At the beginning, just put everyone on 'file a' and when it fills up with 8 players (and the file to the right is empty), take the top half of the players and bump them over to 'file b'. Players can only be challenged by others that are within their file. If a player reaches a rank on their file that is higher than the highest player on the next file over, they can automatically join that file at the bottom and boost every other player on that file up one rank. A player can also automatically join the next file if they reach the 8th rank on their file and defend that position against a challenger. Another bump may occur if someone joins your file and you are in the 8th rank already.
New players to the ladder system just join at 'a1' and can challenge anyone in the 'a file'. Beating a higher ranked player exchanges those players' positions. Set whatever limitations you want concerning the number of times players can challenge each other. I think a sensible limitation might be that while the 'a4' player, let's call him Bob, challenges the 'a7' player, Steve, and loses, then Bob now needs to either defend his spot once or advance to 'a5' or 'a6' before challenging Steve again. If someone else takes Steve's 'a7' spot, then Bob may challenge that person.
If your club is big enough that someone can reach the 'h8' position, award them the title of 'knight', where everyone else that has played up until now is a 'pawn'. The 'knight' player can now work their way up the ladder system again starting from 'a1'. While this might seem discouraging, these stronger players should see it as earning 'achievements' or 'distinctions' and should alleviate the problem of stagnation.
Like I said, I have not tried this, and there are probably bugs to work out. For example, maybe your club will never have 64 players an nobody could ever achieve the 'knight' title. Perhaps then you could just decide that 'c8' (or any 8th-rank square depending on the size of your club) is the promotion square where they advance their title. Obviously the strongest players could, over time, continue to promote from 'knight' to 'bishop', 'rook', 'queen', and finally 'king'. In my head, this seems like it would take a really long time, especially if you are using all 64 squares.
If your club is really big (more than 64 players), I suggest you divide the players into divisions. You could simply call them the Upper and Lower Divisions, or Division I and Division II, or something.
I like the way you are doing it, FS5998, It sounds much better than the peg board and name plates with pegs that I was considering. I will give that a try. Thanks for the idea.