Are you referring to electives during third year, or do some schools not let you have electives until late fourth year? I would agree if you can't do electives or away rotations before applying to residency, that would really suck. Surely most schools let you at least do a couple of electives before submitting?
[Since you're already a fourth year, I'm saying this mostly for the benefit of anyone following this conversation]
It depends on how you define third year. Most medical schools don't let you do electives prior to finishing your required clerkships. At my school, third year is your required, core clerkships. It is not an academic year. So my class will start third year in February of next year, though technically we'll still be in the second academic year of medical school.
So, in essence, at my school, fourth year begins in March of your 'third' academic year, and it is over a year long. Those schools that start fourth year early, and thus allow students to take perhaps several months of electives before applying to residency have an advantage over schools that don't start fourth year until July or August, when applications are due in Septemberish (meaning you have a month or two to decide what residency you want to apply for if you were previously undecided or didn't rotate through your desired specialty in third year).
If someone is indeed applying to a school with a curriculum like this, that would be something to consider. How many are there though? Personally, I would be leery of such compression -- you can make it sound rosy, but one way or another it's going to suck cramming that much information into a small amount of time. You may also be cutting out a whole summer that you could be doing research.
We do pre-clerkship curriculum in 17 months (including time off for Thanksgiving x2, winter break, two breaks in the 'spring', and summer). The class to come in after us will have the same basic timeline, but they will get more time off, and the spread of subjects will be a little different. I have no doubt that we'll be prepared for Step I and the wards by the time we're done. And a good number of people in my class will be during research over the summer.
I don't think we're any worse off in terms of volume than any other medical school, we just get it presented in a more logical way (at least, it seems more logical to me), and we don't have to deal with a lot of the basic scientists going on about their research, when it isn't clinically relevant.