Overall I think there's a lot to be said for removing 'gifted' classes from elementary schools. Start in middle school ( 6th grade here ) and have advanced classes in each subject for students who qualify. It removes the connotation of 'gifted' and allows room for kids to excel in a single subject. I know a lot of bright kids who did _not_ get into the gifted class and I'm not sure it's fair to make them feel like academic failures at the age of 8.
Also, even at 8 there's competition. It's not hard to get study guides for the GATE tests.
That said, there are a lot of advantages to being in the gifted classroom that it would be hard to extend to every class. There's always going to be below average kids as well as above average kids - in the gifted classes they can move rapidly and not worry about leaving anyone behind.
You also get more involved parents with higher expectations. I had a parent in a 'regular' class say to me "Wow, you get a lot of communication from your teacher! Ours never tells us anything but <shrug> the kids seem happy". That wouldn't fly in the gifted class.
It's hard. I don't know what the answer is