 Celtic tradition on the other hand has far more reliable arguments in its favour. Both the Perceval legend, as well as the King Arthur legend are of Celtic origin. Various talismans and powerful or mystical trinkets feature strongly in Celtic folklore and often take the shape of magic lances, bowls or food-giving vessels (the clearest representation of the Grail as a food-giving vessel can be found in the Joseph of Arimathea legend). If one believes that the Grail legend has Celtic origins, then it would appear that "Mabinogion", with its simpler story of vengeance through talismans without much religious significance, would be the version nearest to the original form of the legend. Thus the religious element is a secondary one that occurred when the revenge tale was fused with that of Joseph of Arimathea
The Catholic Church, The Church of England and The Legend of The Holy Grail
Some state that the legend of Joseph of Arimathea, where he and his son bring the Grail, the most sacred and powerful religious icon to England, is essentially a legend of the conversion of Britain. This view is supported by the fact that only one clerical writer, Helinandus, writes of the Grail and the Catholic Church prefered to ignore the legend completely, although the cup of Christ remains an important part of the Eucharist. The Catholic Church's refusal to acknowledge the legend is quite acceptable considering that there are elements that are clearly not canonical. Furthermore it has a basis in apocryphy, not scripture.
However, possibly the most decisive obstacle between the Catholic Church and the acknowledgement of the Grail legend is the fact that the legend claims an illustrious and independant origin for the Church of England. It would not be suprising then if the legend of the Holy Grail was manipulated and contorted so that it could encourage separatist tendencies within Britain. It would be able to do this easily, especially when one remembers that written texts were rare and public opinion was swayed through folklore and the oral tradition. This explanation would also provide an explanation for the relatively late orgins of the legend of the Holy Grail.
Sources and Further Reading
http://www.geocities.com/Paris/5339/graal.html - looks at the literary tradition of the Grail.
www.newadvent.org - The Catholic Encyclopedia. Gives a thorough coverage of all the issues covered here and more. The coverage maybe slightly biased at some points though
www.greatdreams.com/arthur.htm - a look at the Arthuruan legends involving the Grail. Something not well covered in this node.
historymedren.about.com/od/holygrail - links to sites that cover the literary tradition surrounding the Holy Grail
www.rosslyntemplars.org.uk/holy_grail.htm and www.timelessmyths.com/arthurian/grail - more literary tradition and folklore surrounding the Grail
Other Highly dubious (and untrue) but interesting "sources"
The Da Vinci Code by Dan Brown
Monty Python and the Holy Grail by Monty Python