Lets assume that a school can properly separate kids based on intelligence, (which they can't) and that separating kids based on intelligence is a good idea (which it isn't). You will still run into a couple problems if you wanted to try something like this:

1) Kids that don't make it into the "Smart" class will think they are stupid. That is probably one of the worst things you can do to a kid.

2) Having their Kids in the "Smart" class will be much more important to the parents of borderline kids than anyone else. If a school is politically pressured into putting a kid into the "Smart" class that doesn't belong (and this will happen all the time), and that kid struggles to keep up, he's going to feel like he's stupid (see #1).

3) Kids look for any opportunity they can to bully each other. Doing something like this would make it really easy for them to identify which kids to bully because you're defining two different social classes for them. Whichever is larger will bully the other.

PS. Don't call kids dullards.