The school that finished on the bottom of their division would be relegated;
I would love to see a competition encompassing all the associations. It would benefit the players, the schools and especially Australian Rugby.
But there are several factors holding it up. Central to which is promotion/relegation in the normal sense is unworkable. For example, you have a year 12 dominated 1st XV that is smashing the daylights out of all comers. They win the comp and the school is promoted. Sadly the 16's coming through have struggled in their current comp and will now be expected to play even better teams next year.
The cyclical nature of school rugby means you need to find a way to resolve this dilemma before it ever gets off the ground. Travel and fresh reserves would also provide significant challenges.
I put an idea on the Combined AAPGS/CAS Competition thread (post #45 - page 3) Not sure if it's perfect but it could be a starting point.
I don't know if the AAGPS needs to be involved. But as the expanded competition starts developing talent and the results of rep games start trending in a different direction, they may rethink the idea.