Every spring (including the spring about to start), I teach an honors course that normally has an enrollment of about 25, with 15 to 20 of those coming from the top few percent of our students and the rest coming from the top 20%. I give a series of quite challenging assignments that require both a lot of technical skill and a lot of creativity, and students are not permitted to work together. Usually about 2/3 of the students earn grades of A. Grades below B are rare but not unheard of.
I have always felt like the students are missing out on an excellent experience by not being allowed to work together, but I have also always worried that if they work in groups, then it will become impossible for me to tell the B and C students from the A students. This matters for a lot more than just their grades, because a large fraction of these students end up asking me for letters of recommendation and I like to single out particularly brilliant solutions they've come up with. With groups, I never know who had the ideas.
This term, for complicated reasons, I will have less TA support than usual, which creates an argument for dividing the class into say, groups of three, with each group submitting one paper --- thereby cutting the grading by 2/3.
Possible policies are:
1. Stick with individual submissions and figure out a way to get them graded (maybe by enlisting some star undergraduates from recent years).
2. Let students work in groups to swap ideas, but then submit their own individual papers crafted in their own words. This still means figuring out a way to get them graded.
3. Accept group submissions. This has advantages and disadvantages alluded to above.
What should I do?
Edited to add: Guided in part by the many thoughtful responses below, I've cobbled together a grading system I think will work. Of course I don't know whether it will work until I've tried it. I'm therefore not sure whether it's appropriate to post the relevant portion of my syllabus as a self-answer, or as an edit to the question, or to do nothing at all (at least until the semester is over). I'm sorry that I'm new to this site and not at all sure of the culture.
Edited further to add: In response to a comment below, I've posted my plans for the semester as an answer below. If this sort of thing is on-topic here, I'll come back at the end of the semester with a report on how it worked.