Here are photos of the milled out watertable and barrel flats on my 16 ga. grade 1 Mod 1889.
I believe the grade differences in the lower grades are the type of steel used in the barrels:
Grade 1 Decarbonized steel
Grade 2 Twist steel
Grade 3 Damascus steel
Grade 4 I believe this is where the engraving starts and it gets more detailed as the grades go up. If you want to really learn all there is to know about these guns get a copy of Charles Semmers book Remington Double Shotguns. It's the most complete analysis of these guns that I know of. Copies are available from the Double Gun Journal.