I like NSW's system, it's a good system.

1)If you score very highly in your school work, but everyone in the class scores as highly or higher, then your rank wont be as high as your school work might suggest
They factor the internal part against the external part as well. If you did very well in school and so did your class, but did poorly in the exams themselves they realise your internal testing was possibly too easy and they lower your rank accordingly. On the flip-side if you and your class do averagely to poorly internally but do well in the actual exams they realise you were likely internally tested too hard and raise your rank accordingly. This happened in my history class, we all did largely averagely and where very stressed for the actual exam, but when the results came out we all got 80s for it.

2) if everyone in your class does poorly, then it could bring down your overall ranking in the state.
This really is a myth, I've never seen this occur once except in old wives tales. They compare your results with your class yes, but they factor in more things than just that. My software class did poorly, I was the only one getting good marks, I still got a band 6 - 90%.