Re: grades. A multi-institutional study demonstrated that preclinical grading makes a bigger difference to student well-being than other aspects of the curriculum such as the frequency of testing, the number of lecture hours, and the amount of clinical exposure. (Reference: Reed DA et al. Acad Med 2011, 86, 1367-73.) Two interval grading (i.e. P/F or its equivalent) was associated with significantly higher well-being compared to multi-tier grading systems in that study and others (see Bloodgood RA et al. Acad Med 2009, 84, 655-62; and Rohe DE et al. Mayo Clin Proc 2006, 81, 1443-8.) By well-being I mean various measures of burnout, anxiety, stress, thoughts of dropping out, depersonalization, emotional exhaustion. Students at multi-tier graded schools have twice the odds of feeling burnout and serious drop-out contemplation.
There will always be people who will tell you anecdotally that grading system doesn't make a difference, that it wasn't that bad for them in retrospect. In fact at schools where M3s and M4s were surveyed on their opinion of retaining a multi-tier system vs. changing to P/F, a majority (50-65%) typically support the status quo and oppose a change. This was certainly the case at Pitt and Hopkins, before they changed to P/F in the last five years. When you have people invest a large amount of energy and time (thousands of hours) working towards some goal (grades), our minds are naturally inclined to place more value on that achievement and the system that permitted it than might be ascribed to it objectively (what is the real value of having a discriminating grading system during the preclinical years anyway?). When you have people go through an experience that may have had somewhat negative transient effects on their well-being, but they make it out ok, they tend to minimize the negative aspects in their memory. When you have people who were only exposed to one system (e.g. a graded system), they will tend to comment on that system more favorably than other systems they are less familiar with.
These schools like Pitt and Hopkins changed to P/F despite not having the overwhelming support of all the clinical-years students. I'd like to think it's because the curriculum committees of relevance were sufficiently persuaded by the empiric evidence in the literature for a benefit in student well-being, non-inferiority for board scores and other academic outcomes, and residency survey data showing that programs don't care much about preclinical grades. They also may have had enough confidence in the quality of students at that school to not have to need the extrinsic motivation of Honors grades to self-regulate and strive for excellence in learning (see White and Fantone, Adv Health Sci Educ 2009, 15, 469-77).
If I were a premed, I would look to a P/F system as one of many indicators for a higher likelihood of good well-being throughout the preclinical years. It's neither sensitive nor specific, but useful nonetheless. I would also look at a recent change from multi-tier grades to P/F as a positive marker of the institution, its educational philosophy and culture, and the faculty and administrators -- they're student-focused, they're intent on developing students into self-motivated lifelong learners, they're in touch with and willing to roll with the national trends in medical education (even the AMA has policy now recognizing the benefits of two-interval grading in the non-clinical curriculum), they're not stagnant in their policies, they consider student input, they value evidence-based decision-making.