If you are better at something than someone why should you be held back? Just to make them feel better? No way. The school should instead find something that this less intelligent pupil enjoys/is good at.
I spent two years in unstreamed classes in high school. There were ups and downs to them - one was a discussion-based class and the other was lecture-based. The discussion class was excellent - as many of my classes were streamed it meant I got to hear opinions and ideas from people whose GPAs weren't as high as mine, adding diversity to the discussions. The lecture class was terrible; I had the textbook read in about two weeks and was horribly bored for the rest of the class.
So its a mixed bag. Some classes benefit from streaming (especially math and science) whereas some benefit from all-inclusiveness.