One question about admission system and rejection

While reading http://news.ycombinator.com/item?id=1215182 something poped into my head. Ok I have this question which I have been throwing at people for a long time, lets give it a shot here "Lets assume that the proposition that someone who has higher marks in JEE or AIEEE or the state level entrance exam is better off than someone who scored below the even the cut off mark. (Even though most of them are just rote learners) You give him or her a chance to study under best university be it IIT , NIT or BITS. They know they are better and just go through the motions for four years. That explains the lacking culture of undergraduate research in any of those institutes. Now on the other hand we have the Non-<good university> student. Studying under a state level university. Not one of the best even in his/her state. But as he didn't have the privilege of IIT, they try to educate themself more. They hate there studies, but love actually engineering. Four years pass, we have a IIT graduate who just know what he has been taught in class. Never tried anything on there own and on the other hand we have a normal guy the lesser mortal who has been busting his/her ass for four years trying to learn. Take your pick who will you employ?"