For student registration admin approval will be required. Why i want the grades encoded in user name is that it will make the work of the person taking care of approvals easier as he will just have to check and approve.

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I am still not sure about what should i do regarding this. Ideally the student should have an option to upgrade. Where they click on the upgrade button change there username, the upgrade comes as a request to admin/webmaster who then approves it.
Since i do not think it will be possible this way in XOOPS so as a make shift arrangement
The student will have to mail a request to the admin for upgrade with his/her new certificate no. and then the admin will change the user name from old to new and add access to the required group.

Is there a better way to do this?

Thanks again for all the help.

Also is there a way to allow login using either the username or the email address instead of only username.

In principle it is possible, but it requires a change in user.php .

I guess i will take a rest on this for now.

Thanks everybody for all the help specially Ghia.