When I did my course the standards were rigorous. One of my "wingmen" was chopped during the sim phase. Two of my ex-Swissair colleagues failed the interview - one the course.
The reason for this high (pernickity?) training/selection standard isn't arrogance but rather the knowledge that, as mentioned above, a crash would be very bad for easy. Mistakes were indeed made in selection in the past and it was explained to us that Stelios himself had demanded a narrow tolerance on new selections.
As for FOs being tarred "unsuitable for command" at an early stage in a big airline - I imagine that that is the end of their career prospects unless they a) pull their socks up and b) change employer. You can't blame them for trying to improve. I have seen many pilots mature later in their careers.