I like the descriptive system & have commented positively on it before.

In looking at it again, it seems there's a bigger jump between the 3rd & 4th categories (vs. the other descriptions). Goes from "lightly used" to "considerably used". I can envision a chip that's more than "lightly" but less than "considerably" used. Just a fine point to consider. Perhaps an in between grade is necessary (?), though I do support keeping it simple.

As others have stated, I agree that notched/drilled/cracked, etc. are modifiers, and not an additional condition/grade.
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One other idea: perhaps a hands-on experiment in grading could be done at the convention. Something like this:
1. Round up 25-50 chips in various conditions. The chips can be common chips from newly issued rack chips to well-worn chips from the El Cortez or Western, in various molds & inlays, etc. At least 5 of each grade, plus some "close calls" which might go either way.
2. Have a supply of 3x5 cards with the published grading descriptions (from Archie's description, above, or as futher refined.)
3. Also, have a list of the 25-50 chips, with a blank column to write in the grade you think the chip is. Each participant does his/her personal grading of all the chips.
4. At the end of the show, compare the completed lists and check to see if most agree on the same grade, or if there are difficulties following the descriptions toward a consistent result.