Hello Brian:
It is not "necessary" to tell a student when they test. However a certain amount of notice helps when you hope someone will add just a pinch more of "X" (or several ingredients) to what they are already doing in practice away from class.
<<Should it be a surprise?
Dan testing should have more notice than other tests. Surprise is unnecessary, as THEY will bring plenty of that to their techniques
regardless of the particular testing!
<<What would or should a test for Sandan consist of?
Rhetorical? Honed dignity would be my basic answer. Mistakes should be present, far far fewer than previously. It is never the mistakes per se, rather how they are handled when they occur. Make them and collapse or occur and unfased continue as if they were correct technique?! What a given test consists of would depend on the previous requirements of the particular practice/art. Sandan, lets see.... I suppose an absolute minimum of 10 years consistant practice would be a starting point. Personally prefer a 12-15 year minimum myself. Being an adult would be absolutely mandatory, no children period.
I like the Advanced First Aid & CPR certification by one of the national groups, Red Cross, Heart Assn. , etc.
I would contend the ability to discuss in depth any aspect of the art on any level another necessity. But I contend that requirement mandatory for shodan folks. It is meaningless if the limit of my skills is the physical. If I cannot conduct a full-fledged conversation in a depthful manner with anyone who is not a practitioner of whatever my practice... and do so without cyclical jargin... my training is insufficent. Forgive my digression...
What else... ok, a sufficent understanding of what you do such that, you can observe another art, another practice and understand the basic concepts, mechanics of that action/s. Meaning having studied your own practices meaningfully, depthfully for a decade, decade and a half... you can see what "they" are doing, and understand some of the basic what & why's they do so.
I like a basic comprehension of a particular weapon(s). Not mastery by any account, merely a decent fundamental knowledge by that point.
Kata. A tangible credibility in both the presentation and explaination thereof of any within ones syllibus. Such that any piece can be examined, explained and have some credibility. Further investigation, exploration obviously required.
In terms of physical technique, and the capasity to defend oneself...
even here, I do not maintain one MUST be able to "win" an encounter. I can make no mistakes and still "loose". The question I advocate ~...was a very "price paid" for ~engaging~ me...~ is a better question than the must defeat, must-win mind set... IMHO.
At third dan as others have already suggested might be a full-fledged teaching ranking. Whereby first or second dan are excellent technicians, good representatives of what they do... by the level of third dan, (and testing for third dan) the ability to completely instruct a class with complete autonomy is well within ones skill set. Very young children, adults... one should have experiences in teaching lots of different groups.
I am not a fan of academic exercises; book reports, written tests, unless, UNLESS a storehouse, a library of such materials is kept for posterity and to build a knowledge base for others whether in-house or outside groups usage. What you do academically (papers and such) I can get verbally at any time prior to the physical testing. By third dan, we know each other very well, as people, not exclusively as "practitioners". If someone wants to probe my views, beliefs on something, ask... My written command of my native language demonstrated with/by written presentation is superflous...
Merely my opinion, I could surely be mistaken,
Jeff