Unfortunately MFL courses at lots of universities are under-populated. There are not enough good students to go round as fewer and fewer srudents take MFL A levels. You only have to read a few threads on MN to see how parents want their children to drop MFL as soon as possible because it is too difficult. Therefore students with less good language skills and ability can access the courses. At the universities that are sought after, the breadth of student ability narrows because they can maintain standards. At one leading Russell Group university, DD was told on Offer Holders' Day not to worry about her third A level result. As long as the language ones were Ok, they would take her with two good relevant A levels. Just give them a ring if there was a problem.
All university MFL courses differentiate between ab initio and A level students in Year 1 for language acquisition, where ab initio is offered. I understand this is usually not available for French, Spanish and German.
My DD also found the native speakers to have an advantage at the language and translation but there is no answer to this. They can get a degree in something that they have been learning from birth and many have very close ties with the country and the language spending a considerable amount of time in the countries. My DD got a degree in something she learnt from age 11 and 12 with only a few brief holidays in those countries! She caught up. You could argue that a young person who acquired these skills much later in life without the benefit of life dealing them a winning hand, has achieved something fantastic! So hold onto that thought, Moomin!
I am not sure how much was taught in the target language on the modules. As some people were ab initio, one would imagine for Italian, the target language was not used in the first year because no-one had the A Level Italian or even the GCSE! However, to get on the joint honours (French and Italian) course, A level French was required at a Grade A and therefore I imagine there was more flexibility in teaching/examining in French from Year 1.
The universities have a very wide choice of options and of course these are down to the staff they employ and can vary year on year.