Almost axiomatically so if you make it a hiring criteria. The real question is whether it's correlated with good KPIs, (and the secondary question of whether your KPIs express your business needs.)
But what is for certain is that anyone attempting to follow this example will be flooded by applications of lower qualification in general -- making it difficult for any small sized company to deal with.
Just imagine if you had to conduct the search for applicants with a 10x larger pool of candidates. The sheer work involved is sure to cause problems of their own nature. Balance that against how much you really need to find diversity.
I think the trick is to structure the hiring process so that you can quickly weed out the people you don't want. Currently the trick I'm trying: I have candidates write 1-2 sentences in response to one of five hopefully interesting questions:
http://www.codeforamerica.org/jobs/chime/
So far there's been a very good correlation between "can write a useful short answer" and "is worth talking to". Whereas there hasn't been a good correlation with "prestige level of school".
You can reduce the size of the pool of applications that you consider essentially arbitrarily. Shuffle the applications and throw a certain percentage of them into the bin without looking at them. The composition of the set of applications that you consider matters, but the number of applications, past a certain group size that ensures a reasonable cross-section of the application set, isn't particularly relevant.
Unless you know that university graduation is a good indicator of future work success, you may as well do that and get the diversity for free. You're under absolutely no obligation to consider a thousand applicants for one position or anything like that.
I think the 'filtering mechanism' you speak of is vastly overrated, and I'm excited to see things like this happening. People should be hired based on ability and skill, not a piece of paper that they somehow acquired.