Anybody who passes through an MIT or other top notch engineering program, even if they just BARELY eke through, is clearly "smart." The kids I knew who got in there were just natural whiz kids who really loved that stuff...I had to force myself to buckle down and study the crap that didn't really interest me.
A guy with a 4.0 at his local community college may have had it tough in life, may have busted his ass, may have been naturally smart, or any combination of the above, but it does not guarantee he was "smart."
I have no idea how much schools matter, but if they didn't...the selection process would be pretty jacked up wouldn't it?
On the other side of things...a Princeton(or Harvard unless they fixed the grade inflation problems there) grad with a 3.3 could just be a legacy grad, and the 3.3 could come from gross grade inflation.
Didn't one of the NROTC LTs on the board already say that CNET or whoever is in charge of such things has the stats on the universities, individual colleges, average GPAs, etc.? I have a hard time believing the Navy could be so screwed up as to not have taken that logical step. <insert sarcastic quip about Navy or general DoD bureaucracy here>
And like somebody already said...there's always grad school to look forward to, whether or not you stay in the Navy. I'm pretty sure they look at where you're coming from academically.