Wow, didn't think my question would start such a thread.
Nrhareiner - I agree with a lot on what you said.
I will say one thing about breeding grades. If it hadn't been for breeding grades we would not have a lot of horses we do today, such as the morgan, QH, twh, saddlebred, Rocky Mountain, and quite a few others. I do believe that sometimes, if aiming for a goal or specific type, breeding grade type horses is okay.
On the other hand, I am working towards breeding sporthorses. I am trying hard to make sure I pic stallions and broodmares in which I can paper the resulting foal. I do like having the knowledge that goes with having papers. Someone mentioned about how the papers are causing people to breed strickly for one purpose. That is not true - how do you think we ended up with papered horses in the first place. Someone saw something in a horse (ie Justin Morgan) and wanted it. They bred mares and kept track of the babies. Those babies that best exemplified the traits of the stallions they bred again. How do you keep track after a few generations - with papers. Presto, you have your registered Morgans.
I myself am breeding for a ideal. I have it in my head. I am striving for papers, however, if I find I need to breed to a stallion or mare without the resulting foal having papers, I will do it. Then again, I plan on keeping certain fillies to breed and am not breeding just to sell. (ps - the last few statements were not directed at you nhrareiner)