An interesting discussion! I've been thinking a lot about gradings lately, since I just did my 1st kyu test
Anyhoo, here's what's been rattling around in my brain.
Gradings may have been invented for children originally, but that doesn't necessarily negate their androgogic value. The Menkyo system made a ton of sense for the environment it was in - people who were involved in a particular martial art were spending a lot of their daily life training, and the schools were generally small in comparison to the organizations we see today. It was likely that those with certificates received them directly from the current head of their art, after a relatively short but intense training period.
I suspect that many, if not most, people training in a martial art are doing so on a part-time basis - a few hours a week, maybe a bit more. Further, how many of us are likely to have been observed practicing by the Doshu for any length of time, such that he would be able to make a judgement on our skill? I suspect that number would be quite low. The Menkyo model simply wouldn't have scaled to handle the number of students, or their geographic distribution. At best, you'd have hundreds of splintered arts, probably all practicing something similar, but everyone claiming to be the head of their art.
Now, one point I do agree with is the problem of coloured belts. As someone who has yet to test for Shodan, I find it helpful not to know what grade someone is. I tend to be pretty conscious of my own biases, and I still fall in to the trap of seeing a yellow belt and thinking "this person is just starting, I know more than they do". It may be true, it may not, but it doesn't matter. - I should be there to train with them, with an empty cup as it were I'm not suggesting this isn't my own problem, but rather that having an excess of visible grade indicators could be exacerbating the problem in myself, and I suspect others as well. Most of the dojos I've been to, only use white and black belts, but a couple do use the coloured ones. That's certainly their prerogative, and I'm sure they have solid reasons for using them, it's just not my preference.
As for the tests, while I don't need them for motivation for training overall, I do find them helpful in my training. Just as we should practice both hard and soft, I think it is useful to practice with minimal pressure, as well as with a great deal of pressure, at different times. Under significant pressure, it can be difficult (if not impossible) to work on analyzing or refining a particular piece of a technique or ukemi. Likewise, one cannot know if their practice is being truly internalized without having to demonstrate it "in a pinch". Since we shouldn't be out picking fights, testing in the dojo seems like the next logical way to artificially generate this pressure.
