Even if we turn chao into a core formation, id still have yichen above him due to the dao sprout and the ancestral blood droplet those things have made yichen the strongest and taking away the droplet the arts yichen have would outclass whatever chao could get in that time
Golden Core Formation is usually where cultivators starts to form Dao seed, and from what we know Dao seed despise Internal Energy, there's no reason to assume Dao sprout would not be the same. Even if all the upper echelon of the PoMA world knows of the existence of Qi, Yichen himself does not possess the dantian and meridian necessary to store or use it (since it seems only the Rogues knows how to make it thanks to LB).
In this theoretical scenario, even if Chao only has a Dao seed, it'll still serve him better than Yichen's Dao sprout since he would be able to fully utilize it rather than the starved sprout that Yichen has. And technique wise, arts are pale imitation of the Dao, whatever arts Yichen has is inferior to direct manipulation of the universe through Dao.
battle iq still goes to yichen he is much older than chao and has fought in more battles than him and 'shockingly' killed more shangtians than him
I don't think Yichen is accostumed to peer or near peer fight. He's most probably accostumed to being overwhelmingly more powerful than the opponents he had faced thanks to the Ancestral Droplet, barring maybe the dragons (which IIRC was exterminated in a matter of days?) which somehow forced him to sacrifice his lifetime to accomplish. He's too accostumed to being the one being overpowered to know to fight someone that is his equal or stronger than him.
The only reason chao was able to make the arts was due to the gate event he won, he says so in the qna
Damn. I hate off-story sources...
Anyway...