Our school district did this in elementary - the gotcha for us was that we had teachers who would not mark a child at "satisfactory" (or whatever the top category was showing mastery) until 4th quarter simply because 4th quarter was when everyone was supposed to arrive at mastery, therefore they "had to leave room for growth".

I think it could be ok depending on how it's used and, more importantly, are students allowed to progress at their own pace and does the documentation reflect the depth of understanding of the individual student, as Nyaanyaa points out. I'm personally not all that much a fan of the letter system after parenting two children who are all about the A.

Best wishes,

polarbear