Well, the brake fluid level in the resevoir will likely not drop by a noticable amount. Unless you measured it when you put new pads in... but seriously, this is not a good way to check brake pads anyway... just take the wheel off and look... that is the best way.

 

I don't know about the gratting noise, but if your breaks are squeking then you'll more than likely need new pads

 

The wear indicators are designed so that when your pads get worn enough, they will start scraping on the rotors (not damaging them). BUT they will make a scraping noise ALL THE TIME, NOT JUST WHEN YOU'RE BRAKING. Don't try to determine your brake wear level simply by how much brake fluid you have. The best thing to do is just to check them. Make sure you check both the inside and outside pads, though, because often times they will wear differently. One cause of scraping could be small rock(s) that often get kicked up and get caught in the caliper. When you do your once over of the pads, check the rotors, since you may need to have them turned.