In terms of labeling, what I think would be more useful would be a Quality and Canon system, you know? Every story would get two ratings. One for the quality of writing and one for how closely it adheres to the actual universe in which the story is, presumably, as fanfiction of that universe, set.

Canon
A = Superb grasp of characterization and universe
B = Excellent, amazingly accurate
C = Very well done
D = Adequate
E = Canon and characters not well-defined
F = What universe was this again?

An AU, of course, wouldn't get a Canon rating, but you could still Quality-rate it.

Quality
1 = Kill. Me. Now.
2 = Eye, meet sharp stick
3 = Hurt to read, but I'll get over it
4 = Enjoyable moments, could have been much worse
5 = Not bad, not bad. Some good stuff there
6 = Is there any more like this?
7 = Recruiting material!

Seriously. This would be a lot more useful than most of the labels people use today. Forget labeling content (except for my squicks). Label the thing with something that tells me if it's worth reading.)

Or...go ahead...label for squicks. That would be a color-coding system.

Red = Excessive violence (death, rape, psychological or physical torture, maiming)
Orange = Extreme violence (mutilation, beating, minor psychological or physical torture)
Yellow = Moderate violence (abundance of pain and suffering, possible threat of death or rape)
Green = Canon-level violence
Blue = No violence, or no more than moderate hurt, balanced by an abundance of comfort.
Indigo = Sweetness and light abound
Violet = BunnyLand (Warning: pet names, baby talk, animated toys, and other excesses)

If you say a story is F1-Red...well, that pretty much says it all.

A story would be B3-Green for an author who has an excellent grasp of the canon universe but whose story is just not well-written.

A story could be F7-Yellow and if you have the tolerance and you care more about a well-told story than you do about a particular canon...you'll jump in with glee.

I wouldn't read anything below C6 unless I was really rabid about a fandom and there wasn't much available, in which case I'd go D4 in my weaker moments.

(I'd read only Green - Indigo. Should I start thinking that reading about someone suffering is "entertainment," I'll read the news for a few days and cure myself of that delusion.)

Sitting in on someone else's meeting for an hour is so boring.