This is a good question.  Your lucky your daughter's school still has PE.  Many schools in my area have cut programs or modified student requirements.  

I am assuming your daughter is in either middle or high school.  To begin with, I would contact your daughter's school directly in order to get the most accurate information, because each school, district, and state has different guidelines.  For example, in some schools if a student is on a team sport, they are exempt from taking PE and often given a grade based on their sport.  Sometimes, the PE teacher is the coach and gives his/her athletes a pass.

I would ask to speak to the PE department head ans ask very specific questions such as:
Do all students have to take PE?
What are the state requirements for PE in order for graduation?
How are grades determined? (participation, quizzes/tests, just showing up)
Do students have to change clothes?
Do they get penalized for not changing clothes?
Do athletes get special treatment if their coach is their PE teacher?
If not, what safe guards are in place to make sure all students including athletes participate during PE?
What can my daughter do to increase her grade?
Can a student who is not as athletic as those who play on teams, earn an A in PE?

I'm sure you can think of a few more questions.  Ask your daughter what else she sees and what questions she may have that you can ask.

If you don't get the answers you like or if you feel that the athletes should be participating are aren't, call the administration to request a conference.  I also would suggest that your questions are not finger pointing, but instead ones of a concerned parent who want to get the correct information.  Once you get more information, you can make a better decision on what to do next - if anything.

Hope that helps!
Barb Kruger
www.LessonPop.com

As dis-concerning as it may seem, the under-lying question is did the "athlete" meet the requirements outlined in the curriculum?  Or, what is this student's proficiency level for the skills being evaluated?  If the student demonstrates proficiency necessary to warrant an A grade, then the score received is appropriate.

Philosophically, the issue in this classroom is, should the teacher grade toward the content, or should the behavior of the student be graded.  Think about this in a math classroom, for example.  A student never completes the ungraded homework used to reinforce the standard/skill/curriculum being taught, yet the student excels on the summative assessments.  Should this student be graded at the proficiency level dictated by their progress from the exams, or should the behavior be assessed, and impact the student's grade?

I think it would be hard to justify failing a student that demonstrates mastery of the content because they do not complete the tasks the teacher provides to help the student reinforce their understanding of the standard/skill/curriculum.

What do you think?  Should schools begin to provide 2 term grades?  1 for behaviors in the classroom, and 1 that assesses progress?