Your ignorance is showing. In 2008 Australia's roster included exactly one player not born there. Petero Civoniceva was born in Fiji but moved to Queensland with his family as a baby and grew up there and played his first senior RL there. The Kiwis had a total of four not born there, 3 born in Australia and 1 in Samoa. So the Kangaroos had 24 domestically-produced players and the Kiwis at least 20 (it would be 21 if Setaimata Sa grew up there and played his first senior RL there but I haven't been able to find out about that). It clearly wouldn't trouble them at all.

The main thing I don't like about this 14 team idea is that it is going to leave is with groups of 3 and the unfair advantages/disadvantages the teams in them groups will face.

Perhaps one option is to have the teams in one group of 3 play the teams in the other group of 3 instead of their own?

e.g. (seedings in brackets)
Group A - England (1), Fiji (2), Lebanon (3)
Group B - Australia (1), Tonga (2), Ireland (3)
Group C - New Zeland (1), Wales (2), Scotland (3), Cook Islands (4)
Group D - Papua New Guinea (1), France (2), Samoa (3), USA (4)

So England won't play Fiji and Lebanon, they'd play Australia, Tonga and Ireland.
And Australia will play England, Fiji and Lebanon.

Group C and D as normal.

This allows us to seperate the big teams then, yet still have that all-important Aus vs England game to start the tournament.
No fangled Super Groups. And one hell of a lot easier to understand for the public.

3 group games, top two from each to quarters.

I think that's the best format possible if keeping it simple is the aim. And certainly the fairest with 14 teams.

why not seed it then draw it from a hat

That would also make it fairer. The teams I've put in are just examples, but the main emphasis was meant on the seeding process.

I don't think they'll draw teams out of a hat though. They'll want to make as attractive fixtures as possible IMO so will most likely group them in a certain way.

Because there was no fair way of getting striaght into quarters that I could think of.

I am all up for giving the better teams an easier run, but not at the expense of the lower teams, who could potentially pull a shocker and wanted to accomadate for that. Unless I suppose you draw randomly into 2 groups of 3 and 4 and the top two of either group goes straight through, there is a massive bias towards the top teams in the ones I have read. In mine I think if the best teams were all from the minor groups (unlikely I know) then the top four would end up coming from these groups, whereas in others only those from the top groups and a couple from the others get a shot.