What is the proper term for downgraded NAND Flash ICs?
The process is called "binning". Production line binning is how things get graded.  #1, #2, and #3 are correct, but I've never had experience with #4 on.  Also, I don't believe this applies to NAND.  In the case NAND, you expect only about 100k writes per gate (or I do anyway), so you move pages as the writes fail.  

You can probably find information about this in a "design for test" course that's floating around.