I'm going off personal experience here, living in northern ireland where we still have grammar schools, i went to one however they had a part exchange whereby students could study modules not offered by the school at the local comprehensive.
I did this and there was a radically different attitude to the education, the teachers very much had the impression on having given up, probably due to the students constantly not caring, just walking out to have a smoke etc etc.
They didnt even bother teaching the subject, indeed i wasnt even made aware there was an exam for the course (assuming it to all be coursework, which i did the best i could) until my schools exam timetable turned up.
Not surprisingly given how i hadnt been taught the subject or had any idea what should have been on the exam i didnt do so well.
So re-introducing grammar schools is a tricky issue, on the one hand absolutely the cherry picking of promising students and placing them in an environment where the teaching quality is unhindered by the majority of the timewasters/couldnt care less crowd absolutely does yeild more effective education for those students.
But it absolutely must not be at the expense of the students that dont make the grade being hammered with the notion that they're stupid and that theyre not expected to do as much, and being put in an enviroment where this attitude is commonplace, this happened to one of my cousins, an intellegent lass who failed her 11+ because of nerves rather than lack of ability, but she's lost a lot of her purpose from that experience.
Interestingly though its not nessecarily the case that a "poorer quality" institution can provide a worse off education, i did an hnd at tech after leaving school before proceeding to university, and i have in many cases benefited greatly from the practical background that course gave me.
As for the universities issue, more needs to be done to bring universities in line with what industry actually wants, i've just finished up my placement year and during the handover my replacement was from a quite prestigious institution having done 3 years of a masters course before doing placement, he came in acting like he knew it all until it came to light that a lot of basic simple principles and knowledge just werent there, to the stage of wondering what the hell had they actually been teaching him.