I liked what my university's Chinese classes did - they had a special "advanced 101" class. This way, hot shots who still really needed to go through the 101 coursework weren't intimidating those just starting; those who really knew what they were doing could just test into a higher level. Korean classes, which didn't have the "advanced 101", ended up catering to the hottest of the hot shots, and saw a good number of both the hot shots and the non-native speakers dropping out before the 200 level.