When my sensei asks me to take a test, I usually go for it. I might not feel good enough sometimes, but I think his judgement is better than mine as far as Aikido goes... Of course, if I feel very insecure, I don't take the test.
Gradings are good because they let the student feel that they actually do make progress. They are a good measure. Especially when everything feels frustrating and you start to think if you've actually learned anyhing in the last year or two. Not that you learn more because of a new grade, but you still feel like your moving forward.
Just my thoughts.