Joseph,
This does pose a challenge. Using a bit of semantics, I would have to separate grading from evaluation. Evaluation suggests something of a comparison, such as to a standard or expectation. (instructor observation, or degree of participation). Grading asks one to make an assessment of something,(such as learning, or degree of understanding). Each serve the other, and for the instructor to determine progress I think both components have to be in place.
Barry Westling