i'm actually digging this arc. i think the character dynamics are interesting and the action is good.
i do think something ppl are missing w/ the hunter 1st-class exam is that it is a strictly a test to see who the best offensive magicians are. if you're a mage that's more suited for odd jobs that's what 2nd and 3rd classes are for, and you can stay there. the reason fren and frieren are here is out of necessity so they can travel, they are the odd ones out of bunch.
magic has also been on the decline bc mages are less useful now then they were 100+ yrs ago. the demon king is defeated and the country is largely at peace, all of adventuring is down and most parties can do fine without a mage. i doubt that the requirements of a first class mage have changed even if the world has, so you still have to be the best of the best even if the pool is smaller.