I personally disagree with this interpretation of the rating. First of all, it's true that someone who mostly plays against weaker players gets a higher rating, no doubt. However, I disagree on the interpretation of the rating as a win rate (in any context: 1v1s, TGs, ...). The rating assigned by the LocalRatings mod (the default one, as well as any user-customized rating using different weights) is very distant from representing a win rate. A win rate of 20% means that the player wins 1 out of 5 games, which is not good; on the other hand, a rating (as in the LocalRatings mod) of 20% means that the player's graph in the Summary chart is 20% better than the average graph, which in other words means that the player performs very well (and therefore presumably has a high win rate).
In my experience with this mod, a player with a rating of 20% is a strong player; I wouldn't say the same of a player with a 20% win rate.
However, let me clarify one thing again: this mod is based on statistics. In statistics any of us can imagine a "limit case" (it could be, for example, a player who only plays with much weaker players). On the bright side... this mod is based on statistics! This means that, generally, a player who plays with different types of players will experience more reliability in the ratings data.
This comment actually gives me the possibility of clarifying one thing. Assigning a rating to a player can be something very arbitrary and will never make all of us agree. So, I tend to see the rating of a player as the player's performance over the average, or, if you prefer, their contribution to the game. But this is just my interpretation of it. The lobby's rating evaluation is a system only takes into account the win rate, whereas the LocalRatings mod takes into account scores. In this sense, they don't conflict, they just represent two different things.