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S-curves usually form in situations where the people doing the selections are trying to impress a third party, e.g. US News & World Report, future dog purchasers, other peahens, etc. Fortunately that shouldn't be a problem here.

Also, because YC isn't very bureaucratic it should be relatively easly to design a process that ameliorates this. It's an interesting problem to think about though.

Adding some randomness could help to avoid over-fitted populations. Then you could prevent to converge to a sub-optimal state and force the system to look beyond of what it seems the best.

I thought mating was the main cause of genetic diversity, not mutation.

Mutation introduces new alleles, and mating recombines existing alleles. Both processes increase diversity.

Yes, they should inject bad genes in the interest of preserving the species.

Sounds like XKCD