Who cares about grades in phd seminars? I give everyone an A and tell them no one cares, just start publishing.
Grades are an important signaling function. It’s necessary to weed out the incapable before they waste everyone’s time (perhaps most importantly: their own).
Strongly disagree. If you think they wrote a bad paper, just tell them that (and explain why). There’s no reason to use something as coarse as a letter grade to signal something to one of your ten students.
And performance in classes is a very noisy measure of capability. To get tenure, you need to write 10 good papers over about a decade. What they do in a 2-month semester while taking other classes reflects the capacity to write those papers very poorly.