Here's a fascinating brief post about testing the educational system. Even shorter version: rather than give crappy, shallow tests to all students, give very thorough tests to a statistical sample of students. Also interesting is that these testing methods are/were inspired by successful management tactics of companies.
The comments on the above-linked blog post are pretty interesting, too. (Several wrong-headed, of course, but also many interesting observations, such as, "we don't accept a high enough rate of failure" and "schools fail for the same reason the car companies did".)