There is a good discussion of the accuracy of boxes like this here: http://www.eevblog.com/forum/projects-d ... ution-box/
For me for example - If I need 7642 ohms or something, I'll use a trimmer. But often times I don't know if I want a 1k or 100k resistor in a circuit. This covers all your bases. And at the end of the day, chances are you are going to be using a standard resistor value anyways.
And, yes you can always use 1% resistors. I just used what I had on hand(my 5% resistors are never 5% off - they seem to be much closer to 2%) - or you can hand pick them as well. Also, you can always pull the box out of the circuit, and measure the resistance if need be.
One thing to note - that if you have it dialed in at 10k, and you add one ohm, changing the box to 10,001 ohm, it really will change by a one ohm increment.
I guess just like any tool, you really need to know what the limits are - and what it works well with.