But grading people for ability in P.E. is ridiculous.
Why? Granted, anyone who is making an effort ought to get at least a C, but I see no problem with having better grades in P.E. being based on better performance, and I say that as someone for whom P.E. was not one of my better subjects for exactly that reason.
I agree. People that are naturally smart (or at least naturally good students) find it easy to get good grades, why shouldn't the naturally athletic get better grades in athletics?
Indeed, if it is going to be a school subject, why shouldn't it be treated like other subjects? If PE is not ability-based, then how should music and art classes be graded? What about cooking or keyboarding?