Slowly realizing how unbelievably ignorant I am about grading and related issues, I went on a short trip and discovered these two articles that discuss grading on a bell curve. The second one is particularly interesting, as it uses this quote from Einstein (or rather a sign he had in his office) :
Not everything that counts can be counted, and not everything that can be counted counts
and includes a discussion of summative versus formative assessments.
For the mathematically challenged like me there are these two articles that explain how grading on a bell curve is done. The first gives the general idea, the second is a tutorial on how to calculate standard deviation using Microsoft Excel.