I find it interesting that two of my first year courses have already set a game development project. Beyond the obvious it will keep students interested what other reasons are there behind setting these out?
In my own personal experience, game creation is a complicated and involved process. Game develpment forces the dev into a critical thinking paradgim: tons of math (statistics and probability), systems engineering (got to make the rules and make them fair) and other concerns about balance and avoiding dominant strategies. Game creation forces the student to think beyond the standard "float cash, cost, change;" paradigm that I have run accross in many books/courses that have to do with programming and software eningeering.
While you are thinking about games I invite you to visit my inprogress MMO game at http://scarletrazor.com it is still early beta but I have the minimal function active and will be expanding the framework into a more complex game as time allows. It is free to sign up and play so have fun if you are inclined.