I went back and checked through the season's runway shots. Some of them used the same model almost every week, and other designers changed models often. I'm guessing they just kept using the approach they used in episode two, where the designers picked their model in the order their name was selected from the button bag. They stopped showing the selection process after the second episode, but it seems a reasonable assumption that it continued. I can't imagine how else some designers kept the same model all the time unless they had the opportunity to choose.
I'm not sure about the modeling pool though, because you're right in that the losing designers' models were obviously never eliminated. Maybe they went back into the pool as possible candidates for the designer to choose from each week?