It depends on what subjects you are doing.
Some do require the ability to think out situations and be able to apply certain knowledge to them (ie: maths)
But others really depend on the regurgitation of ideas that your teacher and the bored of studies has told you (ie: english)
The UAI in no way demonstrates how smart you are, there are so many factors involved. Getting a low UAI in no way means you are dumb, it simply means that either the subjects you did were not considered 'smart' subjects (ie: physics as compared to senior science) and of course, you UAI depends on heaps of other factors that dont even relate to you HSC marks.
I really think english is the subject in most need of a change, to me its just about how well you are at articulating what your teacher has already told you, basic regurgitation, although you do need some good essay writing skills and creative writing skills. I think english should change, perhaps to skills that we can use later on, like spelling. i mean, they only ever teach it in primary school, and even then, its not that great.
and of course, everyone learns differently, just becasue you didnt go well int he HSC by no way means you are dumb, you may be a more 'hands on' person.
The choices you make in the real world will decide how smart you really are.
That is my, verly long, 2 cents.
Edit: I do agree with wanton though, to get a UAI of 100, you cant be a total dumbass and it means you can dont just reguritate information, but go further and add an extra something.