There's a difference between being an instructor and starting your own dojo.
The best rank to start teaching is when your teacher says you should. In my case, I started subbing occasionally at 1st kyu, and teaching regularly at shodan.
The best rank to open your own dojo is when you have no choice: there are no dojos in the area at all, or none where you feel able to learn. The lower your rank, the further you should be willing to go to avoid taking this step.
The big risk of opening your own dojo, no matter what your rank, is that you stop learning at that point. If you're going to keep growing, you have to be willing to be wrong. That's harder when you're in charge than when you're just another student.
I disagree. Yamada Sensei has been quoted that you grow faster when teaching other students. I've been teaching twice a week for over two years now, and I think I've advanced more because of it. Students ask questions that make you think about how you are moving. And the ability to explain it to others also reenforces your own understanding. However,
There are two pitfalls. One, you can be to become attached to the teaching where you stop listening to students and stop training for yourself. (the ego comes in) The other pitfall every time you teach you take away a chance to train (which for me, effects your stamina).
So on the bright side, you're probably more awesome that you think you are.