A view from a games degree graduate and industry professional.
I graduated from the BSc(Hons) Computer Games Technology degree at Abertay in 2005 with a 2:2. I've been working in the Games Industry as a Software Engineer since June of 2005.
Getting a Desmond wasn't an ideal way to end my academic career but thanks to me being able to prove my skills I still got an 'in'. Getting a first isn't mandatory if you are able to prove your skills although I'd heartily recommend it as it looks better on your CV!
If you really want to work in the Games Industry in any form of programming position you are going to have to demonstrate your skills with a polished demo. Especially coming into it as a graduate. This could be a complete small game or some form of tech demo if you are applying for a more physics/rendering oriented job. You should also be able to provide the source or code samples that show you understand Software Engineering concepts. It doesn't have to be beautiful but it shouldn't be a mess of hacked together rubbish!
Going back to the subject of education, at a degree level you essentially get out what you put in. The lectures, tutorials and assignments give you a base level of knowledge. It is up to the student to get out there and learn more. Universities recognise this and give a lot of students a ludicrously large amount of free time. This in part gives you a chance to up your academic grade (important!) but leaves a large amount of time where you can make games or learn techniques (e.g. the demo mentioned above). You can also fill in the gaps that the degree doesn't teach; for example project management, software estimation, technical documentation and mathematics.
Selection of degree is also important. There are some really dross Computer Science and Games Development courses available. There are also some really good ones although fewer in the latter category. Apply to the very best institutions that you meet the grade requirements for. If you can't get on to one of the good Games courses or want a more general education then apply to the good CS courses. It won't hold you back in my opinion.
Games development is becoming more and more about being a good communicator as well. As the average team size ramps up this is fast becoming a core skill. The ability to explain problems to people of varying technical expertise is important. A healthy and varied social life is important. The days of the anti-social uber nerd with bad hygiene and no interpersonal skills are numbered.
Universities and educators also need to wake up and supply quality content to their students. They need to be more discriminating about who they take on as a course with decent content will be as challenging as many top CS degrees. Games Development Studios also need to work with the universities to provide information about their requirements and if necessary review course components. This will never be critical to the business but is important if the talent we want is to be found.
The other criticisms regarding poor working practices, low-pay and long hours are all valid reasons the games industry doesn't attract staff. Hopefully these things are being addressed. For the record in the three years I've worked in industry I've perhaps done a total of 6 hours overtime. Pay still isn't great but I've worked at a couple of forward thinking studios with regards working practices.