Is it more fair to have a free for all where people sneak in?
It's convenient to say something is not fair as justification to break all the rules.
But what is the justification for discriminating immigrants?
Discrimination, in the legal sense, says that there should be no prejudice against people by race, gender, sexual orientation, disability and other protected groups.
http://en.wikipedia.org/wiki/Protected_class
But legal status is _NOT_ a protected group.
Here's another way to look at it:
Criminals lose rights. They lose the right to roam freely in public among many other freedoms. Some of them lose the right to vote. By your definition, we discriminate against criminals since we treat them differently than we do law-abiding citizens.
Do you disagree with the disparity in this treatment?
Many people see illegal immigrants as breaking the law. Ergo the use of the word "illegal." Many people see them as criminals.
Ergo, differential treatment (or discrimination) is justified.
Even outside of these concepts, discrimination happens all the time. When people apply for a job, the smarter, more qualified candidate is discriminated against lesser candidates. Is this not fair?
When the NFL drafts certain players over others, that's discrimination. Is this not fair?
Anytime a person is chosen over another, you have discrimination. Your assertion that it is inherently unfair is wrong.
Prior to introducing that immigration system there was no legal discrimination by country of origin.
Whether there should be no concept of citizenry is a different topic outside of scope of this discussion.