We played around with TrueSkill last year...
https://github.com/thedropbears/TrueSkill
TrueSkill is the natural successor to Elo. It was created at Microsoft for online matchmaking, and as such is able to deal with alliances of players.
A good explanation of the algorithm is here:
http://www.moserware.com/2010/03/com...our-skill.html