Just responding to a couple of these:
1. UC schools are legally prohibited from using race in admissions decisions. I'm not sure how many times this can be reiterated. There are boxes to check regarding race (and you're always given the option not the check any box) because federal law requires the collection of demographic data. Checking Native American would have done nothing for your child's application prospects. It's just a fact.
2. Almost 90% of UC students are California residents. They will guarantee anyone in the top 9% of CA high school students or the top 9% of a participating high school a spot (it will be at Merced, though). Even if they went to 100% in-state they would not be close to accommodating every highly qualified CA HS graduate. If you want to mitigate this problem you should either be willing to pay more taxes, so that that the UC can expand existing campuses and build more, or be advocating to divert current spending on prisons, roads, etc. to the UC general fund. See numbers and details here:
5. I am glad you recognize that this is just a bump in the road. The freakout by students and parents about college admissions is just a completely unhealthy and unnecessary element of contemporary American life. The vast majority of students are going to find a good fit somewhere that provides them a great opportunity to do/study/become whatever they want to be. But it's hard to take you seriously about getting ripped off by the state of California when you're ignoring an excellent and cheap CSU system that your child would have easily been admitted to (not to mention UC-Riverside, if that is indeed the school they did not apply to). Pretty much every resident of a Mountain West would love to have the sorts of options that CA residents have when it comes to affordable higher education.