I don't know about you, but I think this just kind of confirms the highly competitive nature of med students that end up attending WashU. This isn't surprising as WashU tends to be very stats-whorish thriving on recruiting students who have high GPAs and MCAT scores - thus you have a much higher chance of recruiting more "anal-retentive" / "neurotic" students. Compare this to say Stanford, Yale, Harvard where P/F grading exists in the first 2 years.
There are many in your class that are aiming for prized specialties such as Radiology, Opthalmalogy, or Dermatology, so naturally those who are competitive will want every advantage possible to outrank you, with Honors in the preclinical years easier to achieve than in the clinical years, when it gets much more subjective. It's not surprising that those students would want to build up an advantage early on, rather than have everyone being on the same footing until entering MS-3. I'm sure many of those students would wish 1st year was graded also, if that was a possibility, just to get a leg up on their classmates in rank. Compare that to PDs, where clinical grades matter the most to them and preclinical grades are one of the lowest, if not negligible value.
If you need grades to motivate you to study during the preclinical years, rather than say preparing for USMLE Step 1 (which tends to test differently and emphasize different things that professors do), then I think you'll be in trouble in the clinical years and residency, when you no longer have those motivations. Medicine is a life-long learning profession, where there isn't always a "prize" of a good grade.