I feel like an idiot, but I don't actually understand what the school did. How did they count pass fail courses? Did they give them a grade? If not, are they just listed on the transcript? Could you explain how they are counted (sorry for not understanding).
There is a grade associated with them, but these grades are not counted towards the GPA. They are treated as Pass / Fail on the high school transcript. I believe MIT does a similar thing in freshman year. I think xiggi or silverturtle attended a school district with a similar policy too. The idea was to allow top middle school students an opportunity to experience high school level material at the middle school without threatening to destroy their GPA.
The high school at this district has done two things, first it decided to treat those internal grades as real grades. Then, secondly, decided to weight them on the lower 4.0 scale used for academic courses. This is not how the grade issuing district expected these grades to be used and not how the student taking these courses was told how they would be used.