@CalamityJane,
As others have said, I don't know all there is to know about NCLB even though I teach. So, I am more likely to pick up specifics about what I see in school every day and less about the details of NCLB.
A small portion of SpEd kids do go to other schools when public schools can't educate them properly. When they do go, public schools have to pay for tuition and public transportation. It's a huge expense. Sped is also a big expense, but not even close to schooling them out of district. Our elementary schools all serve sped kids, but one school has a bigger, more in-depth sped department that is supposed to serve those with more serious disabilities.
The reason more mildly disabled students go to regular ed schools and classes is because they get more out of it. They are more likely to try to achieve higher grades because their peers are. Often they are tested according to their disabilities (they have to write less, answer fewer questions, get more time to take tests, etc).
Students do indeed fail. I know two kids on my team alone who are failing at least one class for the year. These are kids with depressing home lives - they don't have disabilities. Sped kids get extra help outside the classroom and often have enough help and accommodations to not fail. Very few of these kids are not learning everything that everyone else is. They are just learning it several times until it sticks.
English Language Arts standardized testing includes writing skills, sentence structure, paragraph formation, different formats of writing, reading skills, etc. Our students are learning grammar. But, it's less effective because of the way we teach it. We're rethinking the process. Already we focus on reading more heavily in 6th and 8th grades and writing more heavily in 7th. The years alternate so that the skills can be taught deeper - they also correspond to the standardized tests given each year.
Math is different. Our kids are taught at a higher level than the standardized tests assess. We are shifting the math classes so that kids will learn at an even higher level. This despite the fact that research proves that many students aren't able to learn algebra until their brains have developed certain skills. This does not have anything to do with standardized testing - this has to do with us being a rich, smart, driven community. Parents and admin want kids to have had more math by the time they leave high school so they have a better chance to get into Harvard or MIT. I haven't heard from a single math teacher in our middle school that agrees with this change.
One harsh reality is that every student has to pass the 10th grade state test in order to graduate. They can take the test over a couple times (it changes every year), but there's a limit. Some kids will never pass that test. I am not sure what alternatives there are. I know there are a few kids who go to the nearby Tech schools. I'm not sure if they have to pass that test. My brother teaches at a school for blind students who also generally have other disabilities. Many of his kids will never pass the test. They have the option of buying into a full year of this private school (remember, if we ship kids out of public school we pay for their tuition) to get a diploma from them.