I very much support the idea of putting honor roll students names in the local paper. I dont believe they do that here (too many students, it would take up half the paper, LOL), but I support the idea. As other posters mentioned, students who excel athletically are often mentioned, and I think that it only makes sense to recognize academic achievement as well.
As far as the class ranking discussion goes, my high school operated the same way as a few other posters mentioned. If you took a regular level class, you received 4.0 points for an A, 3.0 points for a B, and so forth. If you took an honors level class, you received 4.5 points for an A. If you took an AP level course, you received 5.0 points for an A. This made the notion of valedictorian much more fair, since a student with a 4.0 would not receive this honor (meaning that someone who took solely regular level classes would not receive valedictorian over a student who took the most challenging courses available). I believe our valedictorian graduated with around a 4.2 or 4.3 GPA since he took exclusively honors and AP courses whenever they were offered. I would have to estimate that a student with a 4.0 even would have been ranked around 75 out of 450 in the class rankings.
Aside from the class ranking aspect, colleges would much rather see a student who took challenging courses and made a B than a student who took all regular classes (assuming they were capable of more) and made As. Competitive colleges also know which high schools are more challenging than others. For example, a competitive college might let 5 students in from a top performing high school, but only let the top 2 in from a less competitive high school.