@Andy: No problem with partnerships as long as all the rules are followed. The university that I teach at has a great service learning program that has been quite successful (but it took some time and careful planning).
As to being graded: that hasn’t stopped some students from not completing their classroom assignments much less a service project. From my perspective, it took a lot of work to create the opportunity in the first place and I put my reputation on the line several times with the service partner. Yes, the student who didn’t follow through gets a failing grade but I also lost a valuable service partner and future students lost a great learning opportunity.
I also agree with the other commentators in that nothing teaches better than an actual real-world situation. Again, the irony is that several of the students who didn’t follow through were also the biggest complainers that I was not providing a “real-world education.” I completely agree with what you say but the students also have to realize that their real-world experience calls for a real-world commitment from them.