And what would the goal of that be? I thought the goal of education was... education. The grading is not goal in itself. Will this really motivate kids to do better?

It's to prove that a student is actually educated and has a firm grasp of the course material. If one gets an A every week on AI-assisted submissions, can one make such a claim? And can a teacher make the claim that they've achieved any actual education of the student?

A grade, on a single proctored test, is a crude metric, but at least it would be a brutally fair one.