Sadly I cannot disagree with you there. IMO losing traditional martial arts is also a cultural loss as well.
The GKR schools around my area are what I would consider schools of dubious quality. I don't know about your GKR school -- I've never seen it so I can't judge it -- but the ones in _my_ area were incredibly disappointing.
I find the grading system is counter intuitive to traditional/practical training in two main ways:
1) Unnecessary prolonging of learning.
2) The problem with tests/exams is that some students tend to learn for passing tests rather than for actual learning.
I'm not necessarily saying that schools with belts/gradings lack substance per se, but I'm saying that the belt/grading thing feels like a massive (and costly) distraction from what I perceive as the core function of martial arts -- learning to fight.