You pretty much covered the advantages and disadvantages. I will add the following information that you may or may not be aware of:
1. DipRSM, LRSM, CTABRSM and the like are actually qualifiying exams: they give you performance/teaching credentials. Gradings 1- 8 on the other hand have no credential value whatsoever. They do not qualify you for anything. They are simply an opinion of your progress given by respected teachers/examiners. Here in the UK, if you wanted to enter a conservatory, the necessary credential would be a GCSE/ A level in music.
2. ABRSM exams (the ones I am familiar with) do not involve just performance of selected pieces. They involve aural tests, sight reading, and theory (if you want to do a piano grade above grade 5 you need to have passed on grade 5 theory). Most children and teenagers would not have the motivation to tackle these subjects (let us include scales here as well) if it was not part of the exam. So sometimes an exam may get them to work on these subjects.
3. The piano syllabus for 2003 – 2004 was one of the dullest ever. The selection of pieces was pretty dismal. To the point that I have not entered any students for it. I could not face having to learn the pieces, so how could I expect the students to do so? I am hoping that the next syllabus (due August/September) will have a better selection. So you may have to learn pieces that do not interest you at all.
4. The feedback you will get from the examiners is going to be very small. Have you ever seen their comments? It is usually one paragraph long in all, with general sentences like “played well, but the tempo could have been a bit faster”; or “the candidate showed evidence of careful preparation”. I am not criticising the examiners, they do a good job, But they will listen to you for about 15 minutes, and they have to write their marks, and their comments during that time period. So do not expect any sort of detailed evaluation that will be helpful to you or your teacher.
5. The exam itself takes place in a room with you , the examiner and a piano. I would not call this good preparation for a performance. Sure enough there will be a lot of pressure – much more in fact than if you were playing for an audience, since you know that the examiner is there to criticise you, and he knows his business. And on top of it, you will not really be sharing music with him (in my opinion the real aim of any performance). You will be there offering your efforts to be criticised.
Now, I do not want to discourage you from doing exams, and if you feel that the advantages you listed outweigh the disadvantages you listed, by all means go for it.
However, I would like to suggest an alternative. Instead of doing an exam, have you ever considered entering into a music festival?
If you are in the UK, there are literally hundreds of music festivals going on. These have non-competitive events, in which you go in, and you play your piece in front of a proper audience (usually parents and other students and music teachers). After your performance, an adjudicator, comments on your performance, asks you to play again certain passages and gives you advice on how to improve it. The performance may last some five minutes (say), and the adjudication can go well over 15 –20 minutes. The adjudicators are extremely nice, there is no “fear of failure” as in exam, it is a real performance in front of an audience, and the comments fo the adjudicator are really about music and musicality, not about achieving some artificial exam standard.
It would seem to me that such an experience would be more helpful and closer to what you really want (and by the way, it is cheaper too! The fee for participating in a music festival is much less than an exam fee).
I hope this helps.
Best wishes,
Bernhard.