The main problem is that "gifted" becomes a mislabelling, and the actual gifted students aren't getting a challenging enough class.

But it's still good for many students that such classes exist, though it would be better if a higher level was offered in addition.

When I was in school (many years ago in a different country) classrooms were grouped by ability (but there was no "gifted education" per se). The top class would be about top 15%-20%, as a simple numerical consequence of there being 5 or 6 classes. It should not be underestimated how vastly better it is to be in a class where the average IQ is 120, than it is to be in a class where the average IQ is 100.