All you've shown is that of the highschool-educated populace, LW attracts the most intelligent end, the people who are the dropouts for whatever reason.

Right, but even among LWers I'd still expect the dropouts to have a lower average IQ if all that's going on here is selection by IQ. Sketch the diagram. Put down an x-axis (representing education) and a y-axis (IQ). Put a big slanted ellipse over the x-axis to represent everyone aged 29+.

Now (crudely, granted) model the selection by IQ by cutting horizontally through the ellipse somewhere above its centroid. Then split the sample that's above the horizontal line by drawing a vertical line. That's the boundary between the high-school-or-less group and everyone else. Forget about everyone below the horizontal line because they're winnowed out. That leaves group A (the high-IQ people with less education) and group B (the high-IQ people with more).

Even with the filtering, group A is visibly going to have a lower average IQ than B. So even though A comprises "the most intelligent end" of the less educated group, there remains a lingering correlation between education level and IQ in the high-IQ sample; A scores less than B. The correlation won't be as strong as the general population-wide correlation you refer to, but an attenuated correlation is still a correlation.