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That's because those first 1000 lines of code contain the project architecture and style which will heavily influence the next 10000 lines.

I have never heard of a place where "mediocre devs" get siloed off as a normal way of operating a business. If you have under-performing engineers you should change your hiring and think about mentoring or exits for those you have already.

It's more common in enterprise-y settings, since you don't have to pay them as much. Hire a few senior people to do the heavy lifting and stick all the maintenance programming stuff on the others.

Do they know they are considered mediocre? I think I might change my career if I ended up like that.

that's because its more fun to work on that new 1000 lines, vs having to dredge thru old code to add the 1000 lines.