Reader/long time member here...
Is this something for authors to look at? In other words, just to celebrate growth and progress?
Or is it something for readers to consider? Or both?
If it's something readers might be interested in, as one of those readers, I'd vote for KB authors whether trad or indie or hybrid. (Which would Hugh fall under? Bella Andre?) To me, the qualifier should be KB author.
And again, if it's something for readers to consider when looking for authors, I'd vote for not so many divisions and to not start too low. Harvey, you first described it as "KB Best Selling Authors" not "KB Authors by sales rank." As for badges, JRT, you wouldn't HAVE to use them.

I think the honor system would work pretty well. Based on what I've seen here the last five years, anyone inflating their sales would probably be called out pretty quickly. The members here seem to be able to tell pretty well based on sales rank what the sales probably are. (Granted, authors who have a lot of pen names and a lot of books would be harder to judge, but it seems to me their peers know who they are.)
Just some random thoughts. I do like the idea of celebrating our members who have success...as we try to do when announcing the Kindle Daily Deals...
Betsy