Having over the years hired lots of graduates and non graduates, I honestly cant say that one lot are better or worse
They bring different challenges in managing them

Some non grads, think they know everything esp if they have experience in the area in some way
Agree with the deckchairs and Titanic comment re the graduates, have found this, but I have to say in my experience of having grown quite a few departments and companies (of all sizes) the main way of ensuring results is good management

For example Mick, your experience was the arsey fella, but what you have to look at is how the fella has been allowed to behave in this way.
Is it a policy of the company, have they trained him correctly, are they communicating the right principles etc

I have hired lots of people I thought were absolutely useful but with good management, reviews, ensuring adherence to well formed policies & processes turned these guys into really good valuable resources.

Id say it was more to do with the make up and mindset of the individual, most youngsters are pliable and can be influenced in one way or another (as one size/approach does not fit all)
For eg. how do you teach someone to have a work ethic, this is something that is more of a mindset from your experiences growing up normally, you can attempt to build this in with KPIs and measurements but someone who knows what they are being measured to do can still find ways around it if they are that way inclined

I always look for a strong work ethic and ability to question themselves and what they did as a really good guide for a good employee, shows the ability to work hard and grow.

But one thing I strongly believe is that it is the responsibility of the employers to ensure their managers are properly instructed and guided to ensure they are managing their employees well, it takes a lot of communication, measurement and continual improvement

There are organisations that I have been very proud with what I have achieved in implementing this and some where it was impossible due to other factors so its not easy top to bottom, but individually in one department should be easy esp if that dept is customer facing