Cookie:
To answer your first question - there are several reasons why the 'other' schools in selective areas are not often Ofsted Outstanding.
One is the Ofsted process itself. Ofsted grade is not 'intake blind', and it if you sort all schools in England by %PP, almost all the schools with the lowest %PP are Outstanding, whereas almost all those with the highest PP are in SM or RI. So simply by virtue of their poorwer socio-economic mix, secondary moderns will tend not to obain Outstanding grades.
This is exacerbated by the fact that Outstanding schools are not reinspected. Many currently outstanding schools were inspected under frameworks that focused almost entirely on results not progress. While this focus is now changing, with Progress8 etc, schools that benefited from the old regime are not re-inspected.
A second reason is that high %PP and high %SEN obviously bring challenges for schools that may be nothing to do with education but which take time and energy to sort out - the 'social work' side of teaching, if you like. Schools with low %PP and %SEN can devote more time and resources to teaching.
A third reason is about recruiting and retaining the best teachers. many teachers want to teach their subjects right up to A-level, and some SMs o not have 6th forms. Also, teaching in a school free from Ofsted inspections, purely occupied by bright children from supportive home backgrounds will, quite simply, be an easier place to work, and thus many teachers will tend to apply to and remain with such schools if they have the choice.
On your second point, do you mean setting (as in flexible arrangements for every subject, so you can be top Maths set and bottom English set) or streaming (rigid unform banding across the whole curriculum)? IME, assuming you mean setting, setting increases from Y7 - Y9, but reduces for GCSE - it remains in place for subjects every child takes, such as English, Maths and Science, but not for option subjects. This is simply a numbers game - if 25 pupils of all ability choose textiles, or a particular language, then creating ability-based sets is impracticable. Creating sets for more popular subjects might be possible but would create a very rigid 'options' structure in which everyone would have to study e.g. History, Art at the same time, so most schools IME tend to prefer the timetabling flexibility of more mixed groupings. Does that make sense?