> the system does build up palpable differences in ability between a general oxford student and someone just as smart who ends up somewhere else

I think this is just plain false. There are plenty of truly smart people at all universities and the quality of teaching doesn't vary much across universities. The only real difference between Oxbridge and rest is that they're harder to get into. Once you're in they're much the same.

The benefit you will get out of any teaching institution will directly correlate with the effort you put in.