Great post. On this subject, I would say that Rockoff, Jacob, Kane and Staiger´s 2010 paper titled Can you recognize an effective teacher when you recruit one is a must read. Their findings and implications, while broadly similar to what you describe above, allow for a more hopeful (certainly more so than in Ecuador) and nuanced set of policy responses. The link is below but I can´t find a way to turn it into a hyperlink right now.
Another issue not discussed here is that even if prediction from the test is poor the entry into the teaching service (or getting tenure within it) via an arguably more meritocratic approach (relevant tests vs. more discretionary ways) is likely to make untraditional candidates of higher-ability more attracted in becoming teachers. Thus, over time, it may be that teacher quality of the system is improved.