I've always felt the problem is that class projects never have to be production ready. You're expected to show that you've learned and can implement the theoretical material, but you never have to turn that proof of knowledge into a complete, well tested project.

That's one of my biggest regrets about my CS degrees (BS/MS). I took so many classes and did so many class projects that I never had to see one project all the way through to complete, tested, usable release.

And I don't think it's a CS department's responsibility to expect class projects to be built to a shippable standard. However, I do think that it's the school's duty to encourage students to work on a real, production project, of their own creation or as a contributor, on their own time - even if it means taking on a reduced academic load.