I think the only thing you gain (or save) by not applying to the top schools is admission fee. Graduate school (especially Ph.D. program) is not about grades; it is about your research, being stimulated by faculty and spurred by student competition, and making connections that will serve you in your job search. In my experience, getting a C for a graduate course is unusual. Besides, you generally don't specify your GPA in your CV (maybe only for the first position), while you specify the school and your adviser.
On the other hand, it makes sense to select a Ph.D. program not so much by the university ranking as by the potential adviser and the presence of other faculty doing similar research. Even a regular research state university with a suitable adviser can give you an excellent education. I would also recommend deciding early if you want to stay in academia or go into the industry, learning what it takes for each option and assessing your progress to that goal.