Pradeep I disagree with your argument.
Disclaimer: This post is purely for the sake of argument, and there is no intention to offend anyone or any institution. It may be a little off topic as well.
I am not discounting the fact that CAT is a crazy exam, probably enough tougher than GMAT, if i can say that. I am not taking any credit away from the intelligence of these guys. But like anybody who has taken the GMAT or any other CAT (computer aided test), we know that the key is practice, practice and practice. And it also depends on what happens on D-day. Intelligent people get nervous and don't score as well and not-so intelligent people get lucky. So, what I'm trying to say here is that just because you take the CAT or GMAT doesn't make you "intelligent".
I agree that majority of the IIM-A 2 year program students are 22-23 year olds and most of them have Engineering backgrounds. However, these kids have to get a 99.9th percentile in the entrance exam CAT - which in itself is a phenomenal demonstration of intelligence. Also, the group discussions and interviews are no joke - which speak to the all round qualities of a candidate. In my opinion, group discussions, compared to essays are a better measure of the all round ability of a student.
I feel top companies definitely look out for candidates with extra-curricular activities because they want all-round employees who can think outside-the-box. Working 80 hours/week, drinking beers and going home doesn't make anybody a great worker, a lot of us do that. But working 80 hours/week, drinking beers, going home and doing your extra-curricular activity/what you love to do outside work, in my opinion is great. And if I were one of the BBB/Big-3 companies, I would hire the latter because I would be confident that he will bring more to the table because of his experience outside of work.
In your example below, I think the IB company would probably go with the recent grad and not the career-switcher because of the reasons you mentioned below. But you are talking about IBs only, which are generally very analytically/number-crunching focused. If it were to be a Big-3 consulting firm or any other top industry firm, I can guarantee they would go for the career switcher because he/she has all the educational qualifications like the recent grad but also work-ex and extra curricular activities. Why wouldn't they?
Experience - For a successful post MBA career, let's say IB/Consulting, the key attributes of a good hire are superior analytical abilities and an ability to pitch your idea and convince. Some might argue that number crunching abilities are also important. If a candidate can demonstrate these abilities with zero or minimal experience,that should do. Let's compare such a candidate to a career switcher - let's say someone with 4-5 years demonstrated leadership experience. Would a BBB/Big 3 prefer the younger candidate or the one with more experience in a different field. If common sense serves me right - they would pick the younger candidate - simply because young guys have more energy and frankly IBs don't give a damn about non-analytical prior experience. You were an analyst - great, you were a computer programmer - great. You were a history teacher - no thanks. If IBs really cared about prior non-analytical, non-finance related experience, in these turbulent times career switchers would have stood an equal chance of obtaining employment. That, however is not the case.
Extra curriculars - How does extra curricular activities impact recruitment at a b-school?. I may not understand the banking and consulting industries, but from what I've read - GMAT scores are a criteria for recruitment and not extra curricular activities. Correct me if I'm wrong here. I don't see extra curricular activities coming into play post b-school. You do your job, drink and if time permits go home. That's it. Frankly I don't think any employer cares about your hobbies or your extra curricular activities. Besides, after working an 80 hour week who can think about extra curricular activities ?
So why shouldn't a BBB/Big 3 firm pay top dollar to IIM-A candidates - just because they lack experience and extra curricular activities.
Again I apologize if I've sounded too crass or offensive.