While I've never been a recruiter, I've been a hiring manager at some mid-sized companies and worked closely with their recruiters. Side projects or attempted startups are great, but I've seen countless resumes where they get completely overlooked because of how they appeared on the resume.
Ultimately whether I saw a resume was dependent on some sort of subjective pattern matching done by the recruiter. This pattern matching is usually primitive and generally is just a check on whether your "years of experience" is within striking distance of whatever was in the job listing (e.g. "Senior Software Engineer" that required 5+ years of experience, the recruiter would filter anyone with less than 3 years), and (sometimes) would check whether your resume contained enough buzzwords. Yes, this is awful, and no, not every organization does it this way, although a lot do.
So while listing side projects on your resume is good, it's important to get it past the recruiter screen by translating those side projects into years of experience. Rather than just a single line in your resume like, "Side Projects: Enguarde.ly, a Link-Sharing Site for Fencers," find some way to list Enguarde.ly as experience. For example, list the time you worked on your side projects as experience as a "Web Consultant," put Enguarde.ly as a 'portfolio project' and describe the technology you used to build it.
Once your resume actually gets to a hiring manager, everything the OP talked about is much more relevant, because you'll actually have someone who can evaluate your resume. Although I think this post overstates how much your undergrad degree matters. I am a graduate of the University of Pennsylvania, typically considered a very prestigious school, but the engineering school is ranked 27th according to US News and World Report rankings[0]. I know many hiring managers who would much rather interview someone with an interesting set of portfolio side projects than someone who went to a prestigious school. Your alma matter can sometimes provide a small bonus as a small signaling effect, but I consider software engineering a discipline where a formal education is only loosely correlated with skill.
I've seen good resumes and had my boss say "but he only went to .." And I didn't even read the college section So education can matter until it gets to the right people. It's an easy filter, sort of, since rankings are pretty bogus anyway.
I've always avoided being too elitist when it comes to a candidate's school/university when hiring people. Partly I guess because I didn't go to a particularly prestigious one myself. I guess my point is that it depends who is reviewing your resume and what their background is as to whether this really matters.
For me I found that the best way to stand out when looking for a new position was to work on a side project. Sneakily my side project was a resume building app. Which meant I got a nice new resume out of the deal too. It definitely got me noticed and people came to me rather than me having to apply for jobs. I even got some telephone interviews for startups in the Bay despite being located in the UK.
Overall I think if you build out some form of beta app and execute to a minimum viable product level of service then that's going to be a good thing for your chances of employment.
So now for my shameless plug. I'm continuing to slowly bootstrap MightyCV - my resume creation app with hacker leanings. It has integrations with HN, github and StackOverflow along with some other cool features. You can see an example of what one looks like here:
It's an interesting point - true "recruiters" are typically much more limited in their ability to evaluate resumes, which is why hiring managers do the resume review at TripAdvisor (I wasn't being precise in my usage). In reference to your point about universities mattering, though, I'd love to see more resumes from Penn... ;)
Ultimately whether I saw a resume was dependent on some sort of subjective pattern matching done by the recruiter. This pattern matching is usually primitive and generally is just a check on whether your "years of experience" is within striking distance of whatever was in the job listing (e.g. "Senior Software Engineer" that required 5+ years of experience, the recruiter would filter anyone with less than 3 years), and (sometimes) would check whether your resume contained enough buzzwords. Yes, this is awful, and no, not every organization does it this way, although a lot do.
So while listing side projects on your resume is good, it's important to get it past the recruiter screen by translating those side projects into years of experience. Rather than just a single line in your resume like, "Side Projects: Enguarde.ly, a Link-Sharing Site for Fencers," find some way to list Enguarde.ly as experience. For example, list the time you worked on your side projects as experience as a "Web Consultant," put Enguarde.ly as a 'portfolio project' and describe the technology you used to build it.
Once your resume actually gets to a hiring manager, everything the OP talked about is much more relevant, because you'll actually have someone who can evaluate your resume. Although I think this post overstates how much your undergrad degree matters. I am a graduate of the University of Pennsylvania, typically considered a very prestigious school, but the engineering school is ranked 27th according to US News and World Report rankings[0]. I know many hiring managers who would much rather interview someone with an interesting set of portfolio side projects than someone who went to a prestigious school. Your alma matter can sometimes provide a small bonus as a small signaling effect, but I consider software engineering a discipline where a formal education is only loosely correlated with skill.
[0] http://talk.collegeconfidential.com/engineering-majors/12136...