well my brother and i spar with this and the chinese dao alot (obviously dulled weapons) and i can vouch personally for the distractive nature of the tassel. when watching movies of other peoples forms it isnt nearly apparent when actually versing someone lol.
the rings have several purposes the most obvious is it is loud and distracting. the other you need to understand a bit of the culture. the chinese have and always had ALOT of people in their nation and in a war constantly. with that comes the need to supply many men with many weapons. unlike the japanese samuri who were much fewer(and way richer than pesants) their swords could be made high quality(katanas ect) the chinese had to just make swords quickly and easily to supply their rediculious demand and therir for the quality suffered alot. in battle constantly blocking with the edge of your cheap (often flex steel) sword would leave you with a bent cut up peice of metal (shown well in jet li's movie "fearless" or "twin brothers" when they fight on scaffolding. so many chinese forms and blocks are with the back of the sord to not ruin your edge and dull your enemys at the same time. the rings not only further protected your sword but dulled and ruined your enemys blade!
wich is great for its user because it also increases its reusableity because the rings could be replaced and not the entire blade.
/chinese valued their hilt/handel/pommels and usually kept that and just replaced the blade after a battle. also another reason to have fancy tassels to show your status/possibly skill