I understand, but if we have 3 people, I put in 5BTC, someone else puts in 2BTC, and the third person puts in 3.5BTC, the coins all get broken up into random amounts and go through two stage mix, in the end, we still have 5BTC, 2BTC, and 3.5BTC, just in new addresses. Isn't that fairly easy to track? I know I'm missing something... What is it?
You need to agree on a common amount.
Inputs (5, 2, 3.5)
Outputs
2
2
2
3 (your change)
1.5 (change for the 3.5 BTC guy)
You get one of the 2 BTC coins and your 3 BTC change coin. Your software would need to remember that the 3 BTC change coin was not mixed, but the 2BTC one was.
In fact, you could split your 3 coin into two 1.5 BTC coins, so it would be slightly mixed. You would get 2 of the 3 1.5 BTC outputs.
If there was only 2 into the mix, there would generally be two inputs and three outputs, so the guy who paid more gets (unmixed) change.