yeah its not a difficult concept. the fa can allocate 4 places, presumably, to whoever they wish. i guess they could allocate them to the top four in division 3 if they wanted.
there's no rule that the winners of the champions league gain automatic entry, their country's FA has to nominate them. as it stands the FA are nominatng Chelsea, Arsenal, Man Utd and Everton as the four teams to represent England in the champions league next season.
a few years ago real madrid won the champs league (1999/00 i think) but finished 5th in the spanish league. as a result the spanish FA decided to give their 4th champs league place to real madrid at the expense of real zaragoza who had finished 4th in the league