GFR were no doubt the more organic, groovier band and better, more experienced individual players than MC5 though early Grand Funk was still a rough sounding, earthy affair (which was part of their appeal, but they honed their sound quite radically and quickly). I'm a great fan of GFR though I prefer their later phase with Craig Frost as added keyboarder.
That "proto-punk"-badge was in my impression attached to bands like MC5, Stooges and New York Dolls in hindsight (long after they had actually all split up) by British journalists (especially the NME) when punk raised its spiky head in the UK in 1976. Before that all these bands were simply considered "hard (or heavy) rock" bands,
the bland definition of hard (or heay) rock in my book being
mid- to uptempo music with a focus on distorted guitar riffs,
just not instrumentally very skillful ones. Sort of hard rock without the Cream-indebted virtuoso/improvisational component. But in the summer of 76 it was all of the sudden de rigueur as an up and coming Brit punk musician that you were of course weaned on MC5, Stooges and NYD records, when in fact - as the singer of Eddie & the Hot Rods once admitted - "
none of us had actually heard these records, but saying instead that we grew up with The Rolling Stones, T. Rex, Bowie, Sweet, Status Quo, Led Zep, Deep Purple and Black Sabbath wouldn't have sounded nearly as cool".
Sex Pistols Svengali Malcolm McLaren had of course managed the New York Dolls (when they were already disintegrating after having failed to crack the US market with their first two albums), so he was always keen to point out a connection there.