I doubt you can ethically make up grades based on scores....
You don't understand the system, which I think is stupid, but not unethical.
Midterm grades are not "made up." The scores correspond to grades on the school's grading scale, which basically means that there are grades for midterm exams. However, because the courses are year-long, there are no final grades until spring (based on the midterms plus final exams), which are the only grades the registrar's office uses for transcripts.
Clear as mud?