Here's the response from the case [#05003746] I submitted. Edited for brevity.
We tested this in our own test course also, and we believe that this intended behavior. The reason that this is intended, is because of that same logic. Even though you've set the grade to - (Nothing) our system will notify that student to let them know that their assignment grade was changed, and will show inside of their gradebook.
You will also see that as soon as you've put the grade posting policy to Manual, you will have the option to hide grades before entering in any grades. Even with a grade of nothing, our system recognizes it as a grade that was entered even if you changed from points to nothing. This is the effect that you're seeing when you put it in the Manual grade posting policy.
I can definitely see how this could be frustrating though, and I would recommend making a feature request to have this functionality change.
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