And you are starting with the assumption that admissions should reward merit rather than produce it. If a public school is not intended to convert potential to merit, I don't know what is. A school is not actually an "-ocracy" of any kind and this is a weird semantic argument.
If one were going to take a fundamentalist view of merit and exclude potential (again, weird choice for a school!) it would be especially important to define what merit it is you think you can measure. Are you sure the test (+ prep system) do that well? Does spending money on a specialized prep that improves your score translate to producing the merit you are talking about? Or are you retroactively defining merit as "the thing you can measure", because measuring is itself the appealing part?