1. No, a university will not reject you on second application purely because they rejected you the first time around. But if you've not improved upon whichever criteria they rejected you for in the first place, you're not going to get in the second time around unless they change their admissions policy.
2. Please don't think of medical schools in terms of prestige. Medical courses are much more standardised than most other university courses, for the simple reason that it wouldn't be ethical, cost-effective or practical to have a university that consistently churned out bad doctors. There is a certain standard that is expected of all medical graduates, and every single course in the UK has to enable its students to conform to that standard. Besides, which medical school you went to makes no difference whatsoever to foundation job applications.*