I think it's bad too, and here's why: The teachers & staff in charge of the less-performers will do less to help them. Won't push them as hard. Generally just not care(as much). I think it's better for the under-performers to see the strong-performers and understand those kids are not magically-smarter, they just work hard and it's completely possible for the under-performers to be like them if they try to mimic their study habits.
Once you divide a group between the "desired" and "non-desired" traits, there's no way the less desired people will get the same quality attention as the desired. It pretty much will turn into: Group them all together, then systematically eliminate them, condemn them or make them irrelevant. Basically, that segregation will become the solution itself:
"We need to get class-A performance up to get more funding or raise our GPA average so our Class-A looks better to those affluent parents to send their kids to! Hmm, billy & mandy aren't too bright and are lowering the average. We could help them to be better, or we could just move them to the Class-C group; thus eliminating their scores from Class-A's GPA average."