You are a little confused. The BTEC foundation diploma is the one year course you need to apply for art degree courses. Foundation degrees are something quite different and needn't concern us here. It doesn't matter where you do your foundation diploma - your local college is just fine. Its purpose is to build up your portfolio and to help you choose which direction you want to go in for your degree. Most decent art degrees will specify a grade you need to get from your foundation course (it's graded with pass, merit and distinction) and it's usually either pass or merit, depending on the prestige of the course/university. I don't know of one which asks for a distinction.
You can do the foundation course at some universities and this sometimes makes it easier to get onto the degree course at the same university, but all the courses are designed to cover the same ground and your local college will do it just as well. The thing to remember is that the foundation course is free if you are under 19, but doesn't carry any entitlement to student finance, so many, if not most, people do the course at their local college and live at home. It's up to you whether you are in the financial position to move elsewhere.