In theory, I think it's a good idea. I'll describe the CH system, to give an idea of how it works; I gather that they may have changed a few things since I left, but it's near enough, and certainly describes one workable system.
At CH, there were about 120 pupils in years 1-5, then 100 in years 6-7, since a few people left after their GCSEs. (That probably doesn't fit standard terminology of "Year n", but I'm trying to avoid confusing you all with terms like "Little Erasmus".) So, that's about 800 pupils altogether. This was divided up into 8 pairs of houses, so each house would have about 50 pupils. Each pair of houses had a name, and then there was an "A" and "B" side. For instance, I started out in Middleton B.
For the girls, all 7 years were in the same house, so you had about 7 or 8 people per year, and you'd basically expect to stay in the same house for your whole time at the school. For the boys, you'd be in the "B" house for your first three years, then the "A" house for your last three years. In the fourth year, it got split, and everyone would choose to either go up or stay down; roughly speaking, the more outgoing boys tended to go up to the senior house early, whereas the quieter boys tended to stay down and be monitors in the junior house (which is what I did). That meant that there were 15 people per year, except for the fourth year when there were 7 or 8.
Aside from the boys doing junior->senior house transitions (in my case, going from Mid B to Mid A), it was unusual to move to a different house. One house got converted from boys to girls while I was there (Leigh Hunt B), so that got "seeded" by pulling 2 girls per year from each of the other four houses, but that was a special case. The only other times involved individuals who got moved to give them a "clean slate", e.g. one boy who'd been caught stealing a couple of times in his previous house.
Anyway, so far, so good. But what did it actually mean to be in a house? I think it's extremely relevant that this was a boarding school, and frankly I have my doubts about whether the system would have any impact at all in a day school. Lessons were all mixed, so you either had a random selection for each class or it was based on ability (depending on the subject), but your house was pretty much irrelevant there. We all shared dormitories, and when I started these were basically like aircraft hangers, with 30 beds lined up against the walls (i.e. no partitions or anything like that). We'd eat in houses (the dining hall had four tables per house, and you were assigned to a table for the whole year), and do our prep (homework) in the same room, sitting at a big table. Similarly, there was a general common room to watch TV in (with a "house video" rented every Saturday evening), and a shared changing room - long benches and a rom of shower heads against one wall, but (as with the dorms) not much in the way of privacy. When we played sports, that would often mean competition between houses (for football/rugby/cricket), either as a league or a knockout.
So, in practical terms, I knew everyone in my year, and everyone in my house (A side or B side), which is about 175 people. There'd be other people that I knew too (e.g. from choir), but it's a reasonable subset of the entire school. And the 15 people in my house/year were the people that I lived with for 7 years (give or take), so I knew them very well. This does have the advantage that you basically have to be able to put up with other people, and you'll learn that skill by necessity if you don't already have it. On the flipside, it doesn't necessarily mean that you're all going to be friends, and I haven't stayed in touch with any of the others since I left (although there are some other outside factors for that in my case). Anyway, that does address the problems of a huge school seeming "faceless", but I don't think it would work if it was just an arbitrary way to say "Ok, everyone whose surname starts with A has to hang around together".
As for discipline, I think it helps when the teachers have a lot more influence over the pupils. For instance, there were assigned bedtimes (going from 21:15 to 22:00 at 15 minute intervals for the first four years), and the staff would enforce this - no talking after "lights out"! You got a bit more leeway as you got older, on the theory that you'd learnt proper behaviour by that point. Similarly, there were some slightly odd limitations imposed, e.g. you couldn't use the toaster until your third year, and you couldn't use an umbrella until your fourth year. But this did mean that you valued those things more when you got them.
More generally, lots of the debates that rage about state schools just don't apply at a boarding school. School dinners? Everyone has to eat them, otherwise you go hungry. Truancy? It was unheard of for parents to take their children off on holiday in the middle of a term, we had our own infirmary (so you couldn't just lie in bed pretending to be sick), and if you missed class then the staff would find you pretty quickly.
I'd also say that the staff had a lot of influence, particularly the ones who actually lived in the boarding houses. Each house would have a housemaster (or housemistress, for the girls), who had their own flat built in, and there were a couple of other teachers who'd assist. Also, most teachers had a house within the school grounds. The housemaster in particular (and probably the school in general) was legally set up to act "in loco parentis", i.e. in place of the parent. The basic reason for this was that if a pupil needed to go to hospital then the teacher could sign whatever permission forms were required, since the actual parent might live hundreds of miles away. But in a more day to day sense, the teachers also filled the role of parents by teaching us proper values, and there are lots of things they said that have stuck with me, and still influence me now.
Having said all that, there are a few downsides to the boarding school system:
- When I first went to CH, I hated it, and probably set a school record for "highest number of running away attempts". And there were some problems with discipline, that the teachers couldn't/wouldn't deal with, so I wound up in the position of "When it comes to the crunch, I can't rely on anyone else to get me out of trouble - not my parents, not the teachers, and not the other boys; the only one who can help me is me". So, I stopped running away, and started fighting back. All in all, it did me good, and made me a lot more independent than I was when I first went there (although this caused some other problems in turn), but the learning experience wasn't very pleasant.
- I've heard new teachers saying how busy they are, so I'm not sure whether they'd want to move into their schools, thus being on call 24 hours a day (e.g. to assist with fire alarms at 3am).
- I'm inclined to say that in many cases it makes sense to leave child-rearing to the professionals, since they can probably do a better job of it than the parents can. However, I suspect there are a lot of parents (including the bad ones) who would dispute this. I can also imagine a lot of paranoia from the lunatic fringe, along the lines of "Oh my god! Tony B. Liar is going to steal our children and brainwash them into becoming cannon fodder, so that he can send them to his pal the Shrub!"
Anyway, I'll be interested to see what comes of this.