Sadly, if you tried to cancel Sports Day too many of those competitive parents (you know, the ones who love to win the Mum's Race?) would complain "oh no but it's tradition!"
I don't think you can compare it to SATS - these are an important part of reviewing children's learning. Sure, some kids are more academic than others, but it's not as black and white as that. You're not "academic" or "sporty". You might be neither, or average at both.
It's the performance anxiety that is the issue here. So many kids hate it, even if they are good at sports, fit and active.
Like all competitive sports (playing in the football/netball/hockey team) or other types of school performance (school play, choir, band) it could be optional for those that enjoy it. It's just not any benefit to children without giving them choice.
It is NOT inspiring those less active kids to be more active. They should make Sports Day about trying new, different, exciting and fun sports and activities, without parents even needing to be there. I think it would be so much more inspiring.