Try not to get too discouraged. Put in some more applications and do some more interviews.

As for as engagement goes, that is the focus in most evaluation systems now. They do expect a variety of methods and approaches used so that students are actively engaged rather that just institutionally compliant or completely disengaged. Are you familiar with the Kagan Cooperative Learning structures? They are basic, but a good place to start. I have some challenging students myself, and the trick is finding ways to get them engaged while at the same time maintaining classroom control. ALL teachers have hits and misses, even those of use that have been in the classroom 30 years.

The other thing I would encourage you to do (and it takes a bit of guts) is to call the principal of the school where you did the demo lesson, thank them for the constructive input, explain your current teaching situation, and request a second shot at the demo lesson. Tell them you realize now that you were teaching toward your current student population and that you do feel you have the skills to engage a different type of classroom and students; you would like the opportunity to demonstrate that ability. Now, they may say "no," and that will be the end of it. However, what do you have to lose? You are showing a willingness to communicate and learn and adjust; you are showing an ability to be respectful and proactive as a teacher; and you might just get the opportunity to demonstrate stronger teaching ability for them and land that job. I learned long ago not to be passive about such things.