I teach in Japan, so I would not recommend it as a model. As a matter-of-fact, here in Osaka they are lauding the idea of adopting the "No Child Left Behind" model, I kid you not. Education over here is very, very broken. And that's *with* the teeth of the teachers' unions pulled (they're banned from striking), so good luck thinking that union-busting is going to do you any good, either. The only reason that Japan scores higher is the ridiculous amount of money that parents throw away on cram schools, where the real education is done. You could do away with public education altogether in Japan for all the good it does anybody.
By the way, to dispel some of your other misconceptions about Japanese education:
1. Kids here do stand up when the teacher enters or leaves. That has zero impact on anything, including actual respect for the teacher. It just teaches the kids that if they follow certain societal niceties they can get away with anything.
2. Vocational training at Japanese schools is restricted to dedicated vocational schools. They are considered the last place you want to teach because discipline is terrible and student behavior worse.
3. Commercials that laud education on TV in Japan? No such thing. Commercials in Japan are just as rampant as on American television, and just as vapid. There are a couple of channels run by NHK that offer educational programming, but they're dedicated channels; easily avoided by kids who aren't interested.
I don't think this X-Prize nonsense is going to get anywhere, but I don't think that you should be looking to Japan for advice, either. They've attempted to model themselves after the Germans and, failing that, are going after the Americans now. The real problems in the US and Japan are the administrative bureaucrats who haven't actually ever taught, and the fact that people blame teachers for EVERYTHING. You would never blame a PE teacher for your kid being less physically capable than other kids, because bodies are easy to judge. However, trying to make schools crank out grade-A students by tweaking some sort of magical formula that works for everyone is nonsense, too. Some kids are better at certain subjects; some are worse. Some have discipline problems because they don't fit well into rigid systems; some because their parents neglect them, or worse, beat them.
Do you know what the magic bullet is? Tailor-make curriculums for each child based on what he or she can and cannot do. We have the resources and the technology; stop treating everyone like they're cookie-cutter equal, because they're not. The best thing you could do for a kid who is academically challenged is give him more attention, and those who can self-study less; in that way, you're much more likely to bring them up to a similar level in the end, or at least put them in a place where they'll actually learn things that will enable to live a fulfilling life based on their true aptitude.
And stop grading kids on a curve. it only hides the problem and punishes success. Worst idea ever.