Of the two kids I know were admitted off the waitlist: one was admitted the day before school began, and ended the first semester with a 3.91. The other was admitted a week or so before school began and is summering as a 1L in a big DC law firm, sans connections. So no, waitlists do not doom you to mediocrity.
One thing to keep in mind, for all of those on waitlists: kids at at HYS are not categorically smarter than kids at CCN; kids at CCN are not categorically smarter than kids at BMVP or NCDG, and the T14 are not categorically smarter than those at T1 schools more generally. The difference between a 167 and a 169, which, GPA being equal, could be the difference btw a T14 denial and an acceptance, is a few questions on the LSAT, which could be attributed to the side of the bed you woke up on on test day, what you ate for breakfast, and how nervous you felt; not how smart you are. Even high GPAs don't necessarily correlate with legal ability: NO ONE has taken a law course in undergrad, so who knows who will be able to excel at law? GPA and LSAT are just proxies that, in a general sense, predict ability. But they are not destiny: anyone, even someone with a weak LSAT and a poor GPA, can outwork their classmates and do well in law school if they are passionate about it.