I think the biggest problem is that everyone has this crazy idea that everyone deserves to be able to work through a high school education. Public schools are not allowed to expel children based on academic merit, they're not allowed to punish people based on academic performance, and now-a-days it is even hard to give legitimate punishment for behavioral problems. Everyone blames the schools and the government, but it is taboo to blame the child themselves or even their parents.
I like the whole competitive argument that they have in the 20/20 thing. Competition works well for everything else; why is it such a horrible thing for schools?
I only watched something like the first five minutes of the video, but I find that schools already are competitive, but on a more behind the scenes level. I've been in a public school my entire life, and if it wasn't for the all the hard work I did there is no way that I would be where I am now. Even more importantly, if I didn't do better than so many other people, I wouldn't be where I am now. Scary thing is, the majority of this was decided by the time I was done with middle school. I would guess that in most situations kids do as well as they want too.