Hummm ... to answer your question, op, I would say that we do not have a situation where society accepts illiteracy but rather that society doesn't particularly care that a significant number of people are illiterate.
And they are. There was a piece in the TES a few years back that stated 20 percent of all school leavers were functionally illiterate and innumerate -- and this was before the significant increase in ESOL pupils in British schools.
For me, the problem with illiteracy isn't just about not being able to read or write. The really serious concern about illiteracy is that it affects your ability to think. If you do not have the language for a concept or a process, it is incredibly hard to think about it or speak about it in a clear and transparent manner that communicates your thoughts to others.
In short, language trains the mind.
A major concern of mine about poor understanding of language and grammar in Britain is that if you do not understand how your own language works, it becomes very difficult to learn another language to fluency after the age of about 14. I suspect that poor English language understanding is partially responsible for British monolingualism. As many young Brits do not understand how the English language functions, they find it very difficult to understand how certain concepts translate in other languages.
As an example, a colleague of mine finds that her language students struggle terribly with the way articles work in the language she teaches (they change according to gender and case). The reason for this is simple: we haven't taught grammatical case in British schools for decades, so few people understand it.
You may say it is not important, but understanding grammatical case is vital if you want to learn and understand another language or identify what information is missing in English. Political communications, for example, often employ passive construction to avoid stating the subject of an certain action, which, I believe, constitutes a form of propaganda.
My concern over the rise of "could of" and "should of" comes down to the fact that it means that people will struggle to understand the perfect tense: what it is, why we use it, how to employ it and how it functions.