IIT

According to my experience it was horrible to drop one more year. That fear of not getting any NIT or IIT will never let you sleep, pressure of being successful will keep pushing you forward. Expectation of people will be high from you.
But in the end, you made into some iit's or not doesn't matter, what you will feel inside is that you're changed. You will become a better and stronger person, who can face much more problems and difficulties that you couldn't face before in your life. You will become productive in your daily life. And also what if you made it to the IIT's that will be a plus point on your achievements you will made this year. And these average colleges will be still there for you next year. Think about it on your own and ask yourself are you ready to burn in that hell without thinking you'll made it into IIT's and NIT's or not.

I think IITs are a bigger brand than IIMs, atleast outside India.I can only think of the following reasons :
After undergraduate studies from IITs (for which they are known), the students have options to venture into diverse fields, from management to government services, from entrepreneurship to PHDs. Thus they have wider impact on the society, and better brand name.
Most of the students in IIMs have already decided their career paths, and go for relatively similar careers, thus affecting mostly corporate sector.
IITians have contributed a lot to technology sector of the west, and it has been acknowledged there. This is mainly because most countries encourage the "import" of engineers but not managers. IIM grads may have contributed to Indian economy, but it hasn't been acknowledged that much.
IIT's are far bigger than IIMs. IIT Kgp alone is bigger than all the IIMs (including the new ones) combined. Thus they have richer alumni network, and a bigger brand.