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...ET foals are not as good quality as foals that were born by their natural mother?

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Right, this is nature versus nurture

Genetically, an ET foal is no different to a foal from a "natural" birth. So in this respect, ET and natural foals are exactly the same.

Size wise, I think the mare's uterus is 80% responsible for the size of the foal at birth. Then the foal's genetics determine the amount of growth from that point. So theoretically, the ET foal could end up smaller or larger than a natural foal, although in practise I really don't know what the final difference is (if there is any real significant difference at all).

The argument really comes up when we talk about the foal's upbringing. A lot of ET recipients are old TBs who were too slow or too stubborn to race well. Others are unwanted shires. Generally, they are not wanted for whatever reason (generally untalented or lazy etc.). The argument goes that a grade A SJ mare will have a really hard working personality, and that will be a part of her success. So, when she has a foal, she raises that foal to be like herself... she passes on her personality (to an extent) through nurture.

Now, imagine that particular foal was flushed and transferred to a TB who was pulled from racing at 4. She's been stuck in fields, being a mum/herd animal for a couple of years. She's dosile, a bit simple, and very polite. The foal then, might become lazy, thick and naughty (because mum is too nice to tell foalie off). There-in lies your difference...

Now, I don't know whether or not these foals will have the same potential. It could quite easily work the other way, where the recipient nurtures the foal to be BETTER than if he was raised by his natural mother. No-one really knows.

There was an instance of a cloned pair of mules racing, and they hoped for a dead heat. One came 3rd, the other 7th... due to nurture and training. Who knows which had more of an influence.

In my opinion, nurture is not that strong, especially as we take the foals away from the mothers at 4-6months of age, and then they have several years of human nurturing before competing etc. At the end of the day, the genetics are the same, and genetics are the most major player in what people and animals are able to do.

Sorry if that was a little garbled