Magento – Magento 2 : System Configuration select email templates not working

In your config.xml you should have your template declared inside the global tag and have a label on it.

<global>
...
    <template>
        <email>
            <custom_email_template translate="label" module="eztestimonial">
                <label>Custom Email Template</label><!-- this should be shown in the config dropdown-->
                <file>mymodule/custom_email.html</file>
                <type>html</type>
            </custom_email_template>
        </email>
    </template>
...
</global>

Right now you have this outside the global tag.

[EDIT]
And in order to work, the path of your system.xml field must match the name of the template with _ instead of /. In your case custom_email_template.

So your system.xml should look like this:

<sections>
    <custom ...>
       ....
       <groups>
           <email ....>
              ...
              <template>
                  <label>Email Template</label>
                  <show_in_default>1</show_in_default>
                  <show_in_website>1</show_in_website>
                  <show_in_store>1</show_in_store>
                  <sort_order>5</sort_order>
                  <frontend_type>select</frontend_type>
                  <source_model>adminhtml/system_config_source_email_template</source_model>
              </template>
           </email>
       </groups>
    </custom>
</sections>

And the <default> tag in config.xml should be

<default>
    <custom>
      <email>
          <template>custom_email_template</template>
      </email>
    </custom> 
</default>

Not sure about this but your input name is wrong.
It should be in this format groups[general][fields][terms][value].
That structure is needed in order to read the values properly and store them in the database.
[EDIT]

Checkboxes are a bit strange.
If you don't check them, no value is sent via post and the way the system configuration section works for magento it will ignore the not checked field.
You should try as much as possible to avoid checkboxes. Use yes/no selects instead.
But if you really want to use the checkbox, me your _getElementHtml method look like this:

protected function _getElementHtml(Varien_Data_Form_Element_Abstract $element)
{
    $html = "
       <input type='hidden' name='groups[general][fields][terms][value]' value='0'>
       <input type='checkbox' class='required-entry' name='groups[general][fields][terms][value]' value='1'>";
    return $html;
}

Adding a hidden input with the same name before the checkbox will ensure that something is sent via post even if you don't check the checkbox. When checking the checkbox, the hidden input value will be ignored.