What do the various entries mean in the bowl file, and how do they interact? What I think I know is listed below:

rank (the lower the number, the more important the bowl, and the higher priority given to taking teams)
type (can be Regular or Championship or SemiFinal or QuarterFinal - but what does this mean in terms of what they do? I assume that QF are filled and played first, then SF, then F - if that is so, why would any rank be needed for these?)
Name (name of the bowl)
Conference1 (the preferred conference to provide a team - if 0, take best team available)
Conference1Standings (what team in the conference is taken - but if there is rank, why would you need to know this? Wouldn't bowls just take the best teams available?)
Team1 (if you specify a team, do they host this bowl if they are not already in another bowl, and if they are not available, then use the conf preference?)
Conference2
Conference2Standings
Team2

Typically what people do is take the existing file, and just tweak stuff to get the effect they want.

The rank is the order they are evaluated... but yea, the bracket games may not need the rank other than for organization purposes. I don't have the code in front of me to confirm though. The type is needed for code purposes. The bowls are evaluated in order of rank. The semifinal bowls are the top 4. The rest of the bowls take a slotted team from an associated conference. If the #1 team is in the semifinal it will take the next best and so on. If it runs out of teams or if there is no affiliation it will take a valid at-large team. The conference1 and 2 are the conference tie-ins, and the standings are the place in the conference where they're targeting... the bowls can't be evaluated in "best available" because you get the 2nd or 3rd team from one conference and the 11th ranked team from another, even though teams 1-10 haven't been picked from conference 2, so we need the standings to give the bowls a shot at realistic slotting.

Team1 and Team2 are additional specific team tieins for specific bowls that the game will use.

In the base bowls file, the same team number appears in multiple bowls. How does that work? The team can't play in multiple bowls. Team 65 in the Smoky Mountain Bowl and the Carolina Bowl. Could be in others, too. I think I saw it in several.

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So, Conference1Standings could be considered the max standings that the bowl can access, but if that team has moved up, because teams above it were moved up, then the bowl might have to take a lesser team. So, it is important that no two bowls are looking for the same standings in the same conference explicitly. Will a bowl abandon a conference if there aren't teams left or the teams that are left aren't very good (i.e. bowl eligible)?

Yes, if there are no eligible teams in conference or with a specific bowl tie in (65) the bowl will drop down to any bowl eligible team.