This article was in Field and Stream a few months ago:
http://www.fieldandstream.com/articles/fishing/2010/02/gill-plate-grab-catch-release-pike-without-net
The gill plate grab is common practice, and unless you have a lip gripper tool or net, the only way to land fish with teeth. It's especially common in ice fishing, because once you get the head out of water, you can pull the fish out without horsing it. As the last sentence of the article says...always support horizontally. With long fish like pike, or lake trout, you can pull the ligaments away from the fishes back bone, rendering its swimming skills useless, so it will die.
With smaller walleys, I think you can grab them above the gills from the back, also. Your story reminded me of one of a time fishing with dad and grandfather on the St. Lawrence in NY...my dad hooked a pike and for whatever reason, my grandpa decided to lip it, to bring it in the boat...blood everywhere!