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I've heard conflicting information that you can get better knowledge by just continuing to kill, or you have to reset it at some book in Calpheon (or reset it with an Elixir of Oblivion in the loyalties shop) and try again to get a better rank. I don't know which is true.
...Man, I wish this game wasn't so vague with its information sometimes. I want to help people, but it's giving me nothing, lol.
You can also get the reset potions from the cash shop with 25 loyalty points. Most people park an alt character at the NPC though.
http://steamcommunity.com/sharedfiles/filedetails/?id=954135874
A higher rank does seem to affect loot drops and damage done.
Once you reach a rank with a monster, the only way to get another is to reset it. Killing the same mob won't improve the score. You can also get a worse rank than you had before, if you reset an A+ you can go down to a C.
I think it's a dumb system, but thats the basics of it.
As you earn any knowledge your max energy goes up. To reset monster knowledge at the Calpheon library it also costs you around 10 energy per monster.
Resetting monster knowledge basically means you are forgetting what you learned, so it can lower max energy till you kill them and learn it again.
I haven't noticed any XP loss but if you do it will only be a small amount. When you learn that monster knowledge again you get the energy and stuff back anyway.
You just get a new RNG shot at getting a better rank. Although, if you're anything like me you'll get rank C 95% of the time anyway, lol.