This paper presents the results of tests done to review and discuss required levels of accuracy in the entire instrumentation and measurement chain of PMU-applications for distribution grids. Specific grid monitoring and estimation applications could have different requirements in terms of accuracy and resolution of the PMU estimates. Apart from the PMU's own accuracy, the overall accuracy of PMU estimates are dependent on accuracy level of the entire instrumentation channel and the grid's physical parameters. The results and discussions presented in this paper are in the context of a PMU-based line parameter estimation and Dynamic Line Rating (DLR) algorithm for medium voltage lines. These tests could be used to check feasibility of the DLR application on existing instrumentation infrastructure as well as to select the instrumentation equipment for futuristic applications in grids. The same methodology could be utilized to investigate the feasibility of other PMU-based applications for distribution grids.