I don't know that it's the system working wrong per se, so much as the system needs time for everything to settle out.
Eventually the diamond skill players will end up with diamond flex mmrs, and silvers with silver flex mmrs, and so on. Right now since the queue is new and many people haven't put much time into flex, theres loads of diamonds with silver mmrs (and possibly even silvers with like plat mmrs just from placements). It should all work itself out with time, but it might be a bumpy season.
That said, an actually coordinated team of golds could probably go toe to toe with an uncoordinated group of solo diamonds. Teamwork and coordination is sort of the point of that queue, so I fully expect in the long run there will be solo diamond players who actually won't be able to solo their way to flex diamond, since eventually the higher ranks of flex will be dominated by coordinated teams (some of whom who will be not so individually talented in solo queue).
Still, give it time. Playing against higher ranked people is a good learning experience, and if you don't tilt yourself immediately from looking at their rank, you might find they actually are human and not that unbeatable. I've played against (solo queue) challenger players in flex, and while I'm certainly not challenger, I was actually somewhat surprised to find that I could keep up (albeit barely), and in the end my team actually won (my team being mostly solo queue plat/diamonds).
Alternatively, get tilted and replace most of your dictionary with one word. Maybe you'll feel better, but eh. Eventually things'll shake out.
aaaaannnnnnnddddd..... Out of booze.
"useless top lane!!"
