Is it normal practice to refuel commerical planes whilst boarding is taking place?
Refueling with passengers onboard is quite normal and is done according to the recommendations of regulatory bodies/manufacturers and operators. Refueling with some fuel types are not permitted, while others are. From Airbus Flight Operations Briefing notes:

Refueling  with  wide  cut  gasoline  type  fuel (JET  B,  JP4  or  equivalent)  or  when  a  mixture  with  these  types  of  fuel  might  occur,  is  not  permitted  with  passengers  boarding, on board or disembarking.
Refueling with Kerosene (JET A, JET A1 JP8, TS1, RT, TH or equivalent, as approved by  the  approved  Aircraft  Flight  Manual),  is  allowed  when  passengers  are  boarding,  on board, or disembarking.

Some precautions are required to be followed in case refueling is done with passengers on board. The announcement you heard is simply following that. From Appendix 1 to JAR-OPS 1.305 Refuelling/defuelling with passengers
embarking, on board or disembarking:

(a)   An  operator  must  establish  operational procedures   for   e/defuelling   with   passengers embarking,  on  board  or  disembarking  o  ensure  the following precautions are taken:
(1)   One qualified person must remain at a specified location during fuelling operations with passengers  n  board.  This  qualified  person  must be  capable  of  handling  emergency  procedures concerning  fire  protection  and  fire-fighting, handling  communications  and  initiating  and directing an evacuation;
(2) A  two-way  communication  shall  be established  and  shall  remain  available  by  the aeroplane’s  inter-communication  system  or  other suitable   means   between   the   ground   crew supervising  the  refuelling  and  the  qualified personnel on board the aeroplane;
(3)  Crew,  staff  and  passengers  must  be warned that re/defuelling will take place;
(4)  Fasten eat Belts’ signs must be off;
(5)  ‘NO  SMOKING’  signs  must  be  on, together   with   interior   lighting   to   enable emergency exits to be identified;
(6)  Passengers  must  be  instructed  to unfasten  their  seat  belts  and  refrain  from smoking;
(7)  Sufficient qualified personnel must e on  board  and  be  prepared  for  an  immediate emergency evacuation;
(8)  If  the  presence  of  fuel  vapour  is detected inside the aeroplane, or any other hazard arises  during  re/defuelling,  fuelling  must  be stopped immediately;
(9)  The  ground  area  beneath  the  exits intended  or  emergency  evacuation  and  slide deployment areas must be kept clear; and
(10) Provision is made for a safe and rapid evacuation.

You're right about the announcement and leaving seat belt open- it is to help in quick evacuation. The flight crew is just following the procedure.