1. I grew up with zero-grading, and I live in Australia. I went to a public school for the first 2 years of schooling, then my family shelled out money to put me in a private school for the rest of my schooling. Both used zero-grading, and from a fairly young age as well.
2. I think it's great for anyone under the age of 15. Too many times, when I was going through my schooling, I saw fellow classmates repeatedly hit with zeros, or near zeroes, and they lost all enthusiasm. Worse still, teachers tended to look at the "zero" students and come to the conclusion that they were just "not cut out" for academic work. The zero grading system didn't just hurt the student's sense of self-worth, it also condemned them to the category of "useless" in the teacher's mind. The teachers came to see the zero students as mess-up, no-good, stupid, "destined-for-manual-labor" types who didn't warrant attention except to hand out detention.
The No-Zero Grading system forces teachers to try to get the student to improve. They are not seen as "zeroes", they are seen as people in need of help. It was always ridiculous in my school that the talented, brightest students got the most attention, and the worst students got barely any attention.
3. There are some downsides to the policy. Real life hands out zeroes, sometimes fairly and sometimes unfairly. Also, employers don't look at clueless employee and think "Now how am I going to improve his report writing skills?" - they think "how can I fire this schlub and hire someone who can write a freaking report!" Universities hand out zeros. Also, we want people to try. Fear is a motivator - it's a great motivator. It's what got me through schooling, a bachelor's degree, a master's degree and now the first two years (assuming I pass my exams in November) of Medical School. If we gave the impression that "you can always try again", we may run the risk of students becoming lax and uncaring towards their studies.
4. As before, I think it's fairly good for schooling up till the age of 14 and 15. In Australia (at least in the State of Suuny Queensland), our rankings that we graduate with are based ONLY on the grades the person has attained through years 11 and 12. Grades from year 10 and downwards? Not counted at all. Which begs the question of why we need to give grades in years 10 and downward. If they're not going to count, why hand them out and damage a child's self-esteem? I accept that grades are important, but let's not beat down a child's sense of self-worth with F's and 0's when they're young. Let's not teach them to feel like failures, humiliate them in their class and consign them to the "useless" category in a teacher's mind.
Too many teachers see a "zero" student and think "why bother? He'll/She'll be working on the assembly line, so why do I need to bother to teach them trigonometry or good writing skills?". Education is valuable for its own sake - even if a kid isn't "gifted", they still deserve an education, because education builds character - it really does. The educated man or woman is less likely to mug someone on the street, even if they are poor. Making the Early-years of schooling about grades, and you'll get a lot of kids who'll think "I'm no good, why should I bother" and even teachers thinking "They're no good, why should I bother?"