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I've met too many brilliant people from very mediocre schools to believe the hype. Yet perhaps the ones who hold the salaries have the biases that reinforce the notion that a top school is important.
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You hit on a key point there. Going to a prestigious school doesn't mean you're more qualified than somebody who went to a mediocre school. However, there are plenty of qualified people out there, and given two similar candidates you'd rather take the Yale graduate over the some-mediocre-school graduate.
Then you have to factor in the alumni connection. Once that Yale graduate gets into a position to be able to hire people, chances are that the new jobs will also go to Yale graduates, so this process kind of feeds on itself. The last company I worked for, as well as my current company, hired me because I went to the same undergrad as both VP's. I'd say I'm qualified, but was I significantly more qualified than all the other people sitting in the room? Probably not. In the future, when I'm in a position to hire people, you can count on the fact that I'll look for alums of my alma mater.