If you look at NYC, they have a model of neighborhood elementary schools and location based high schools, but also a network of merit based advanced and magnet schools.
When I was in high school in a rural upstate NY town, we had tracked programs with "smart" and "not so much" kids and rarely interacted directly with kids more than one track up or down in school. (There was only 90 kids in the graduating class)
It was a real eye opener when taking some mandatory class as a senior (something like civics) when I discovered that my writing partner didn't really know how to read or write. To me that's the tragedy of schools -- that should not happen.
There need to be other changes to go with that, but the people electing to stop school would be happier and I think wouldn't miss out on much learning.
I think the real genius of making college free is not making it mandatory (of course, easier said than done). It's there if you need it and want to take the next step in your education, but for those who would rather not be there or would do something else that should be a viable option as well, and then you don't have to marginalize the education across the board.