> Obviously admission requirements will have to change.

This is where the focus needs to be. Big colleges get an enormous amount of applications. They do not have the man power to deeply analyze each candidate. So, they use metrics to filter candidates, such as required course work and a minimum GPA. The current high school curriculum is largely dictated by this, and I don't see that changing with your system because the incentives are the same, whether you call it 'passing an AP calculus test' or 'becoming a level 9 Math student'.

> For example, leveling up in Calculus would be about solving problems, putting calculus into practice, writing a project using learnt concepts.

This isn't that different from how schools work today. How was your grade decided in Calculus? By solving calculus problems. You don't necessarily put it into practice, or write a project, but teachers could certainly assign those things to you. Many science classes give you open ended science projects.

I agree with your intent, and I like you way of thinking, I just don't see it doing away with enforcement and standardization. Yet.