I think now DTV is available those "Faux" Ed students will just move over. The majority anyway.. I think the only obstacle is the 500k but there are workarounds.
Not every location does this though and then to to every establishment. Genuine students have never had issues. Those who just want the visa and not attend generally choose establishments where this is not an issue :-)
Certain locations this has been true a while though. When I did the driving test the other week one guy was saying his attendance was checked and had to be taken to immigrstion for extensions. His school would not lie for anyone. They also had immigration visits unannounced.
No idea about his application but just yesterday a guy from UK posted about being in Thailand while his application being processed in UK. The Embassy certainly can see a lot of information is the system. Whether this is total record who knows. If an Embassy puts a note in system why they rejected DTV other embassies can see it. As for your poi t about denial at point of entry not seen a credible report yet of anyone denied entry while holding the DTV.