I just got into AFAing vintage MOTU a few months ago so I will offer my meager experience. Others (you know who you are!) will hopefully jump on here and help out more! Please feel free to correct my mistakes!
1. They grade the card, bubble, figure. The overall grade is always the lowest so if a figure is B75 C85 F90 then the grade will be 75.
2. I don't think unpunched does anything to its grade, though some buyers prefer them and will pay more.
3. Things like the NEW! logo, variations (round back Two Bad or painted back Tung Lashor for example) will be mentioned on the AFA tag. Also, the year (duh) which I really like.
4. Yellow bubbles get marked as Y but does not seem to affect the overall grade. Cracked or dented bubbles, bubbles splitting from the card, all bad. In fact, if the bubble is off the card, they will only grade it as loose-complete.
5. For cards, "spidering" or creasing is a big drawback, as is spotting on the cardback, white edges, crushed corners, etc. Wavy but smooth might not be bad as the AFA cases are designed to flatten them. Basically anything that is not a smooth flat bright card will hurt the card grade.
6. I don't think price tags remove value but damaged cards from removed tags do. I actually sort of like a clean whole tag as it furthers the whole "back in time" aspect of this hobby. Seeing some of them marked down to like $2 is fun as well. Especially KB Toys tags, since they are no longer around. I would probably even pay a bit more for a figure with a Children's Palace tag since I have fond memories of that panda-mascoted TRU rival of the 80s.
7. AFAing adds value...to people looking for AFA figures. :P But to them, it seems to add a lot of value - hundreds of dollars or more. It also saves them the paperwork, shipping, insurance, packing, and waiting that AFAing your figures involves.
I've bought 5 figures pre-AFAed and I just got back my first shipment of 6 figures to them a few weeks ago for a total of 11. I have a single AFA70, that's some people's line. And I bought an AFA60 figure just to get it in my hands to tell the difference. I will eventually upgrade but it was a figure I needed so I'm in no hurry. Got it for a song as well.
They look nice displayed, which some people enjoy. However, you can no longer Zolo them to a wall so space/shelving may become an issue.
I'd recommend only sending in your very best, shooting for an overall AFA80 grade but that's just what I've learned from others. Also, I would not send in more than 4 at a time. My 6 took a while and came back in a HUGE box! Also, send in the spring and not the fall, they get backed up before the holidays.
Hope this helps! Best of luck and don't forget to share your grades with the rest of us!