Our system went to standards based grading this year, and so far as an educator I love it! I've noticed that it keeps you more accountable to what you are teaching and helps you keep a better eye on your students progress in specific areas.
Right now we have not gotten a lot of positive feedback from parents. I think a lot of that is just them being apprehensive about something that is completely new.
I work in a very small school (400 students) and I am one of the few who are incorporating Web 2.0 concepts into the classroom. Learning with technology has only helped me with the standards based reporting. There is still room to go beyond the standards, but since the students have a better understanding of what is expected of them they know what to look for when we do a collaboration project.
I would never limit my students to the standards, but anything they do in the classroom can be connected to a standard. And if they are going above and beyond for a specific standard then they of course receive a 4 for that standard. A "21st century" classroom has, I believe, helped more of my students receive 4's because they are more eager to do more and explore beyond just what is expected.