Ref. your "feeling that the internships should be pass/fail only, and
that a paper is not a necessary product of such an experience" --
 1.  I have never had an intern write a "what I did on my internship"
paper, but I have had always had them complete projects they summarized
in papers, usually for object files. A non-intern completing the same
project would need to leave a clear paper trail and project justification.
2.  Whether you give an intern a specific grade or use a pass/fail system,
you as the supervisor need to be comfortable telling interns what they
did wrong as well as what they did right.
3.  The work completed by an intern needs to include a representative
sample of the interesting, the dull, and the just plain work, as do our
jobs.  My job has included lots of writing, so theirs should have some. I
get rated annually in personnel reviews, and interns should also be rated
in some detail, although I suppose there is nothing sacred about the A-F
system.