I don't think rank/grading is incompatible with O Sensei's views of harmony, since he gave out ranks...
I've been practicing about 2 and 1/2 years now, and have known for over a year that rank doesn't guarantee ability (technical, ukemi, or spiritual), but it is a very loose guide to what to expect. Rank means little to me, but testing means a lot.
Testing helps show which areas I am strong in, and which need more work. It is a way to show my teachers and partners what I have learned, as a form of 'thank you'. And it is a good demonstration for junior ranks. I'm not in a dojo I can test in right now, and I really miss it. For me, the rank is just what happens after the test, it is the test that is important.