We've decided that a four-year degree is today's high-school diploma, so that means that you need to produce a lot of them. But you don't need a top tier research university to produce a stream of reasonably competent first-year teachers, engineers, feeders into medical and law programs, etc.
That can still be an excellent school. It doesn't have to deliver moonshots-- it has to serve its purpose.
Just because a school is highly selective doesn't mean that it produces a quality educational product or is serving the needs of its community. How many top schools are "selective" because they're mostly places for the children of the 1% to mingle before taking over Daddy's business? Are they going to be pushovers for grade inflation after asking for the cost of a condo for a semester's tuition?
Why is rejecting prospective students something you expect a great school to do?