To the best of my knowledge, redirecting all private school funding isn't practical, but I'd love for you to prove me wrong.
I very much agree with this, and I also want to point out that it's not merely an issue of money. It's an issue of culture, which is a much larger issue which money (funding) alone can't fix. Like I was saying, you can have the best facilities in the world, good labs, good computers, good buildings, smartboards, pretty tables and chairs, large whiteboards, lots of textbooks and good equipment but the truth is, if you grab a bunch of kids who don't want to learn, throw them into school and force them to be there, they still won't do well. Thus, it's probably better if those who actually want to learn get this equipment. I think that's the major issue at stake here.
However, I do have a slight beef here. Here's a question to consider; do the kids genuinely not want to learn, or are they moulded (by their peers) to believe that wanting to learn is a bad thing and is considered "nerdy?" If it is the latter, then what SHOULD be addressed (I don't really know how at this point) is the cause of the school culture itself.
Now in response to what you're saying, I think it's a combination of a lot of things. Let's talk about foundations first, many kids lack motivation in the latter years of high school because for whatever reason, they didn't focus in younger years and hence are now slacking off because they don't understand the foundations of the subjects they are doing and they lack the ability to do well. This is where a practical alternative comes into play, like instead of offering just VCE English, we should offer other subjects which, instead, focuses on basic writing and basic English skills, so we can be teaching students how to write letters, how to structure good sentences and how to sound sophisticated, we can teach interviewing techniques...etc. so more practical English skills. Try and think of it from a student's perspective - "Why do I need to learn how to analyse the works of Shakespeare?" - and that's a perfectly valid question - if it's not for them, then we need an alternative.
The second issue is the culture, you're right - many of these kids if placed in a different schooling environment will perform differently, that's why I'm a fan of weaker schools having accelerated programs, well not so much accelerated, but special programs for their best students, I'm a fan of the whole concept of streaming but again, many smart kids will feel out of place amongst the others and will want to be a part of the normal classes instead, which is where things become complicated.
Lastly, we also have to look at the end product of improving education, what do we actually want? Do we merely want more kids to finish VCE, or do we want to send more kids to university, do we want to decrease unemployment or are we just looking to make sure everyone has a higher standard of education overall, all these aims are different and really require different sorts of intervention.
For example, if we simply want more kids to finish VCE, we can simply just offer a wider variety of subjects or lax the requirements...etc. If we wanted more kids to go to university, we can just open up more university places and have a wider variety of courses, more of which might be centered around practical learning. If it is to reduce unemployment, we should be teaching kids employable skills, especially those who do not wish to go to university. So it's a broad issue, but WHY we actually want better education, and what exactly is a better education will be determining factors in how we approach this issue.