I'd have thought the opposite. If Hogwarts is the only school around, thats going to result in lower standards. They benefit, as @Blinker suggests, by having children of the elite attend and the highest attaining students as well. But then they also have to take the worst students, those with learning difficulties, genuine incompetents, people with next to no magical talent etc. And they don't, that we see, have any particular differentiation in class for ability levels. Everyone studies together, there's no high attainment route, and no special ed route. The best they can do is give a top achiever the ability to time travel to take more classes, so that they're sufficiently challenged.

If you lump everyone into one class together, the best students naturally receive far less attention and assistance than the worst students. And often, the average students receive even less attention and assistance than the best students. So everyone gets held back by the presence of, for example, Crabbe and Goyle in the class because they take up so much of the teachers attention.

Simply on that basis, I'd say that Hogwarts probably has a fairly substantial fail rate at OWL.

I don't think I agree that the Weasley's are actually that impoverished, it probably only seems like that because they're very thrifty and have an unreasonably large number of children. Arthur is the Head of an Office at the Ministry, that isn't going to come with a bad wage. Its just that it has to look after 7 kids. And to bring it back to education, even though those kids won't have had the benefits of private tuition etc the way you might imagine Draco Malfoy getting, Molly will have home schooled them through all their basic education. And as we see in DH, she is a truly formidable witch who killed Bellatrix. Add to that the fact that several of her kids demonstrate extremely high academic achievement...I'd suggest that the Weasley's are an outlier because of genetics. Predisposed to good academic and magical performance.

 

I would say that there is no such thing as average wizard, every wizard is prodigy or at least extremely talented at something. Even if person seems to have no talent at anything, they just need an area to prove themselves.

Examples:
1) Gilderoy Lockhart - completely average, even seemingly incapable of anything – later appears to be extremely talented with Obliviatus spell. Memory charms, as we know from Hermione, are very difficult, so it is quite an achievement
2) Vincent Crabb failed at Defence OWLes exam, however, in his seventh year he managed to successfully cast the Fiendfyre, perhaps the most destructive known spell in HP canon.
3) Peter Pettigrew was called average by everybody, including his ex-friends and McGonagal. However, he not only managed to become Animagus in his fifth year with his friends help, but also coasted extremely powerful explosive charm, tracked Voldemort in Albania, a task in which other Death Eaters failed (including Lestranges and Crouch Jinior, whose best idea was torturing Longibottons for a miracle of information). Moreover, he managed to successfully create a homunculus body for Voldemort, and together with Barty Crouch Junior they managed to defeat Alestor Moudy, the legendary auror.
I would say that average Peter had many magical achievements then all of his talented friends combinied
4) Magically weak Merope Gaunt once she had freedom and motivation managed to make a lover potion to Tom Reddle, a least part of six year curriculum (or seven, Slughirn demonstrated it with other very advanced potion). At least, Dumbledore beleived Merope to be capable of that

To sum up, every wizard is capable of achieving beyond average achievements. Then what is average?

I would say, that average performance is performance of a common wizard in an area of magic they are not interested: Gilderoy at anything that is not memory charms, Crabb, for example, at transfiguration and Merope at repairing Charms. It would be quite a low level, because those people lack motivation

I would call beyond average wizards, who have more than one area of interests or those, who successfully cast magic not in their profile area. For example, injured mr Weasley successfully creating chairs for his visitors in St Mungo at first try

 

Well, I'm not sure I agree with some of your examples of excellence. On number 4, there's more than one love potion. Amortentia is the most powerful, and thus presumably the most complicated. There's nothing to say Merope brewed Amortentia.

On number 3, tracking someone down doesn't make you a power wizard, it means you have a small amount of logic and common sense, and so can follow a trail of clues. He cast a single powerful explosive spell, I'll grant you that but I'll cover that point in a moment. Everything else you mention he accomplishes with help, guidance, or instruction from someone else.

On number 2, and tying back to Wormtail's explosive spell, what denotes power and skill? I personally think its going to be how quickly you can pick up and make practical use of a new spell, which then turns into knowing a larger number of spells, rather than being able to use a single, albeit powerful, spell. Crabbe may have spent the better part of several years learning to cast that spell, same with Wormtail. To put it in real world terms...I could do a hundred push ups or run a marathon. That is to say, if I practised every day for a long time, I could do that. I couldn't go and do it right now. And it would take a damn sight more training and practice for me to do it than it would for some other people. There's also a flip side to this argument, which is that we only know of them casting those spells a single time. There are recorded cases of people lifting cars off of their loved ones in emergencies, they aren't superhumanly strong, it was adrenaline, panic, etc allowing them to do a thing they normally couldn't. Perhaps that same sort of thing happens with magic.

So I would dispute that a single instance of casting a notably powerful or difficult spell makes you a powerful wizard.

I'll give you that Lockhart is capable with the memory charm, although again we don't know how much he had to practice it to get that good. If he had to work super hard to get there, then I don't think it makes him an example of competence.