Alright! I've finished Bryan Caplan's The Case Against Education and it's definitely very interesting, although I remain unconvinced. This is gonna be real long, really more of a blog post, but I don't have a blog, soooo strap on in.
This is overall excellent, but your understanding of broader signaling theory is lacking. Your signaling model is only one of many ways education could signal ability. Read _The Elephant in the Brain_ for a broad overview of signaling.