Dgodon suggested we have more comprehensive methods of assessment; I want to suggest something more stark.
Scrap letter grades completely, and replace with pass/fail.
If you want to distinguish the elite from the ordinary, use portfolio samples: there's enough variation in pass-fail work to please everyone. Elite students can also distinguish themselves by simply getting through more work faster.
Pass/fail typically allows students much more latitude to explore personal interests, is less prey to subjective marking (endemic in arts and humanities subjects) and gives remedial students more opportunity to catch up and improve.
Note that this does not mean scrapping numerical data and standardized tests; these can be useful comparative data if designed and implemented well.
A corollary to this approach: it begins to make more sense to scrap social progression as well, and offer a more self-directed syllabus (which I'll put in a separate idea).
[I know this idea isn't really within the scope of this site, but I just wanted to put it out there.]