Hello
We Have the same problem as you have. We have Moodle 1.6.3 and we also don't want e-mails to be send automatically when updating and grading students. We want it to be only per user, namely each student can see his own grade only in Moodle system and not by e-mail.
I hope someone know how to deal with that. I guess in some other courses in the future we might want it to be work as it is know ( with sending those emails) I hope it is not to complicated.