I just read a great article that described a lot of my concerns regarding grading, and described the changes one school took to correct these. It was called "Grading Practices - The Third Rail" Clicking on the link should bring up the article, as well as my highlighted passages that resonated strongly with me.
In the article, Erickson describes the problem with giving a single percentage score as a grade, because an 81% can mean completely different things. Perhaps a student is a genius, but willfully skipped one major assignment which he received a zero on because it wasn't worth his time. Or maybe a genius who got sick and had to miss the last two weeks. Or perhaps its a student who really knows very little about the course objectives at all, but completed every assignment, did test corrections on every test, and even passed a few tests, albeit with illegal help from a friend that you never noticed. Obviously, these are two completely different extremes, but they help illustrate the vague nature of a single percentage score grade. Erickson's suggested alternative, which I hope to implement more, is to grade according to the standards and benchmarks.