When I lived with my parents we had an elderly lady as a neighbour.
Her friend used to visit sometimes, and she would literally be bouncing off the rev limiter whilst pulling away :O
Strangely, she appeared to have the clutch control to not crash the car which I really don't get.
Anyway, I would support a periodic medical / physical test that tested eyesight, reaction times etc. I think for all ages would be best, maybe more frequent after a certain age. The age part is probably something better decided by experts actually looking at data rather than me making it up though.
I'm not sure I would be overly keen on making people basically re-take their test. There is no way I would pass mine now, and I only did it 10 years ago! A basic theory test would be fine, though the older people would not like that I'm sure.
EDIT - Also, I was helping fit a shop a while back, and an elderly man put it in reverse by mistake whilst parked on the road outside, then mounted the curb, smashed through the corrugated steel "wall" and managed to move the racking back 4' :S That's the kind of thing that seams to only happen to elderly people (note not all elderly people, only those that should have hung up their keys years ago and they must know it)