Whenever I try to set the origin of this patch of grass to the 3D cursor all that seams to happen is it moves the object location to the 3D cursor. Whats happening here?
Changing the origin point wont move the object, it changes where the object is "attached to".
Lets say you wanted to pick up a cup, you can pick it up by the handle, you can pick it up by the tip, you can pick it up by lots of ways. Wherever your skin touches the cup, thats the "origin point".
What are you trying to do with the grass? You can upload the .blend here http://blend-exchange.giantcowfilms.com/