I'm in the minority but for me It depends on the horse, and the person who owns the horse.
My first Horse was an arab X mare that I owned from the time I was 13 til I was 26. I rode the ever lovin' crap out of that mare, and had her in some pretty stupid situations- She is the most willing,even tempered predictable horse I have EVER known. She loves to be ridden,and is far from a plug, yet if you put a kid on her back and let em go,she will take care of that kid like its her duty. She now belongs to my former B/O who had severe horse anxiety from a nasty fall she took several years ago... This mare has helped this woman get back in the saddle again.
I tried several times to get a foal out of this mare but she never did take unfortunetly. She is gradey and has horrendous cowhocks (which to this day she is a sound as an ox even though I rode her discustingly HARD in our younger years).. but IF she had taken, I have NO DOUBT that i would have gotten a great little horse from her.
IMO papers don't make a decent horse and lack of papers don't make a chitty
horse. If a person is making an informed decision on the breeding of their mare (grade or not), and is breeding to a stallion that will compliment their mare and *hopefully* lessen her flaws, AND there is a definet plan and a desire for the foal- whats the problem? I get that there is a horrible overflow in the horse market, but I'm not not gonna breed a great mare of mine (grade or not) because of it..