Well, I don't have ideas and actually had to read through this post twice to fully comprehend :-)Bravo!
I fully agree with the statement that we do not like to differentiate kids/talk about different levels if giftedness for the fear of someone being hurt. This to me is US problem.
I grew up in Europe and let me tell you, teachers there loved to work with smart kids. I would go as far as saying that it was the kids of lower than average intelligence that were suffering in those classrooms. Lessons were tailored toward 25% of the smartest students. Giftedness was nurtured by teachers staying after school to prepare kids for academic olympiads.
I do not want to put US down, this is my home now and I love this country. But what struck me here many years ago was this believe that anyone can accomplish anything if you only work hard enough. Unfortuantely, in most cases this is not so. Some are bright enough to do their doctor degrees while others can only go as far as vocational school And it is OK. This is normal!
Look at it this way: most parents will look for help when they have a student that is underperforming, but when they have a one constantly getting top grades they will be just content and do not seek any additional enrichment. I know that it is very simplistic approach, and maybe it hurts some social groups, but that is what I would advocate for. After all my kids are smart and this is my starting point.
When I was about to start high school, I had to take an entrance exam. Everybody knew which high school had what ranking,top school would only admit top students. This way we were among our intellectual peers. The system was very easy, you knew you had to study extra hard to get into the top school. And once you got in , teachers hold you to very high expectations. Schools like the one described in School of Dreams were everywhere.
My kids living in Utah do not have the options I had back in Europe 30 years ago! And do not get me even started on learning foreign languages - nobody here sees this as an important part of elementary education. While in Europe little kids are learning two foreign languages!
The problem - teachers are being evaluated according to how well the class will write a test. Thus teaching to the test and NCLB.

But back to Trinity's postulates - How do you want to acomplish
what you believe would be the right system of evaluating kids. What is your next step? Or were you just "venting"?
Ania