I understand the concept behind this, and I understand your argument as well. The reasoning, I think, is pretty simple.
Let me try to better explain what I'm trying to say, as a series of steps:
1. Teachers start treating everyone as smart
2. To treat everyone as gifted, more challenging material has to be introduced.
3. As a result of increased motivation/whatever, the size of the gifted student pool doubles. 80% of the class is still not at a gifted level.
4. No Child Left Behind, morality, failing students, angry parents come into play, and educators are forced to answer questions about the other 80%.
5. Two problems are now in play: First, there is the failing 80%. Second, of the 20% of gifted students, 10% is smarter than the other 10%.
6. Because there can be no tier separation of students (gifted/not gifted), material must be taught the same way, and the same material must be taught (otherwise, discrimination?)
7. Educators have a decision to make: Teach dull material that suits the last 10% and 80%, or teach engaging material that suits the top 10%, but is difficult for the second 10%, and near impossible for the 80%.
8. Choice A results in the top 10% of students losing out on an education, and Choice B results in 80% of the class failing.
9. I hate to bring this up for a very liberal and optimistic audience but: the 20-80 rule is very prevalent in society. It's inevitable that the top 10% will probably account for a good 50% or so of the nation's GDP and innovation when they're older (no, I have no evidence, but it makes sense).
Are you beginning to see my point? I went on a first-date last night, and compared my high school experience (didn't learn a thing, wasn't told about SATs, people were stabbed, no AP/IB) with my date's high school (UTS in Toronto... 2 entrance exams to get in, contests and opportunities made available, etc). I'll tell you now, that I feel like I missed out on a lot of opportunity. By changing education to this model, you'll find more people who feel that way (maybe not as extreme).
PS. My education was so bad, in fact, that by the time I took my SAT II subject tests, I know I needed 800s and I hadn't learned 70% of the material in Math II, Physics, or Chemistry. I bought books, and for the first time in high school, I actually studied.