Hello all! Last October Matt Campbell posted a small hack: http://moodle.org/mod/forum/discuss.php?d=82574 that does much of what is being discussed here (if not all), and it did not require any settings changes, new capabilities or modifications (except adding the lines in course/user.php, which in Moodle 1.9.3 begins around line 126ish)
I believe it does add the overview to the profile, as Martin mentions, but only for users who already have rights to view all a student's activities (mentors, students, admin). I just tried several different ways, (using both forced and disabled My Moodle settings) to access all course grades as teacher, and I can not.
I don't know if it's my particular environment settings, or how I initially defined teacher roles (though it's nothing out of the ordinary), but even using this hack, teachers can only access or see a student's grades for the courses they teach regardless of where they are or how they navigate to a profile.
I'm aware of several users who have used Matt's code, and it's well-received, very simple and very effective. Now...if we can just retain grade information once the student is un-enrolled...(Progress Tracking looks good !)