My old teacher is French. (He left Ireland again..) He went to France last year to grade for nidan. He was telling us a story about grading with live tanto for dan grades(FFAB, I think), because just before his turn some guy did a bad block against a yokomen and got stabbed in the forehead. The story was sonically illustrated by the loud rapping of knuckles off a wooden bench.
A person grading at this level shouldn't be phased by a live blade, but obviously there can be trouble if they are. However, incidents like the one above are going to be rare because you're probably not going to be allowed grade (or at least do so with a live blade) if you're going to freeze up, and whoever trains you is going to have a fair idea of whether you're capable.
Live katana brings up a whole other world..... There's a much bigger difference between one of these and a bokken, you'd have to be training regularly with one... (OK, I held a katana once and I didn't swing it, and I'm only 4th kyu anyhow...)