It's seniority in rank, not seniority in age. If Ransom gained his fourth pip after Janeway did, he would be Janeway's junior.
No doubt the Starfleet rule about the ship rather than the person mattering makes things considerably clearer in combat. One doesn't need to call up Starfleet records to see which ship is the more powerful combatant...
Although regarding this, the decision to banish both Picard and his ship (rather than, say, send Riker orders to take command of the ship and throw Locutus in the brig, eject him in a lifepod, or execute him) may have been influenced by the E-E not being considered particularly combatworthy. For a parallel in history, the King George V class of battleships was the most powerful in the Royal Navy during the hunt for the Bismarck, but these ships were "the most advanced in the fleet" to their own detriment: HMS Prince of Wales did not have all the kinks worked out yet, and the factory crews still aboard failed to make her gun turrets properly combatworthy before the engagement with the German ship, to the detriment of the British.
Quite possibly, Starfleet thought it could afford to keep the still experimental and unreliable Sovereign class in the sidelines during this Borg invasion. And sending Picard to shake the ship down was fitting punishment for the man who lost the previous Enterprise...
Yeah, but Janeway recognized him by his reputation as a captain, had records of his tactics all of which suggest he'd been a captain for awhile back before they got lost. Nothing concrete, but it's a reasonable conclusion he'd been a captain for some time.
As for your point about keeping the E-E on the sidelines due to not having worked out the kinks, that's a relevant example and a good one. Crusher did ask if they felt they needed more shakedown time. Though the movie shot that possibility down too since Picard told Riker they had faith in the ship, but not Picard. Which would argue it being silly to sideline "the most advanced ship in the fleet."
Really that made no sense at all being even hardass Necheyev had not qualms about keeping Picard in command against the Borg in Decent and Riker was -the- veteran against them after all. Except to my original point, the script requires Picard to charge in and save the day.