What can you expect from students?

This is a recurring topic in the pedagogic course I'm currently attending. Primarily, this question is brought up in response to the general notion that the base knowledge appears to be dwindling with each generation of students, but also in response to the instructors' persistence that teachers should strive to present the material using the latest technology (video recordings of lectures, online discussions/tutorials, etc), and also to encourage interaction with students using e.g. Facebook and Myspace platforms. Wielding the awesome powers of the 50+ hours of pedagogic training I've had so far, and correlating this with my own teaching experiences, I've begun to develop some pretty strong opinions about the subject, the majority of which can be formulated as follows:

1. Alas - the knowledge base in certain topics - especially math and physics - is strongly reduced among the majority of students, which is ironic, seeing as how the number of required courses in these subjects appears to have increased over the last couple of years.
2. The students have obviously not become dumber over the last 20 or so years, so that's hardly the problem. Not even the combined effect of Teletubbies and reality TV could affect the evolution that quickly.
3. Seeing as how university teachers observe this "in real time", i.e. there is a decrease in the amount of knowledge between generations of students, it is highly unlikely that the problem lies at the university, unless the same teachers become progressively worse at teaching. There are many things one can blame on university lecturers, but this is probably not one of them.
4. There is however a direct correlation between a decline in the knowledge base and graduation from new reforms as implemented by the government. Every time the powers that be try to change mathematics into an arts&crafts-project at and below high school level, we see the consequences. For all I know, there might be tons of positive feedback from other disciplines, but for natural sciences, it's a disaster. Again, this is somewhat ironic, seeing as how natural sciences have been the benchmarks for each reform.
5. University funding is now to a large extent based on the number of passing students each academic year. In other words, if X students graduate, we get Y amounts of cheddar. Which means that if z% flunk out, we miss out on z% of our funding. I'm not sure how instituting financial penalties for failing students and then setting the universities in charge of evaluation is the best way to improve the our academic institutions. Does it work? Well; since this was instituted, the percentage of failing students has dropped significantly. I'll leave it up to y'all fine folks to figure that one out.....
6. Assuming that the decline is cased by a steadily widening gap between knowledge obtained at high school and the level we base the introductory university courses on - what should one do? Lower expectations at the introductory level and postpone the sharp learning curve which is sure to come unless the education should be prolonged? Not care and let students fail? Devalue the programs? Or actually start to rank high schools and universities in 1st and 2nd-tier institutions......
7. We haven't actually done ourselves any favors by giving more and more local colleges university status, thereby effectively providing more university-level seats than there are university-attending asses. We don't increase the quality of the output by a) not setting any requirements for entry and b) not failing substandard candidates due to financial penalties. And why should the students make an extra effort when the papers they get out count for more or less the same regardless of at which institution they obtained them?
8. So; how can we as educators motivate the students to surpass their previous efforts? By jumping at every possibility to communicate with the students through media where they are likely to reside anyways, like Facebook and Myspace? In my opinion, nothing spells "three to five years" like a male professor haunting the Myspace pages of his female students, so I'm gonna have to put that idea in the "sucks" category......
9. Video lectures? I guess they work great for repeating certain subjects, but if you're able to pass a math class by simply attending the lectures or by looking at video tapes of lectures, you'd pass anyways.
10. By providing the students with more and more snippets of information through different learning channels, I think we're increasing the surface (as opposed to the depth) learning. Looking at a video of something is no substitute for having to work through the material for yourself. Interestingly; while we try to implement whatever technologies we can get our hands on in explaining why something is called "free energy", the institutions which objectively speaking produce the best students use traditional lectures on the blacboard. Go figure...