That is the question. This is also a decision and not a quest. When you declare yourself Nerevarine, you will join the "Nerevarine" faction, with all of the baggage that comes with being a member of a faction that the other factions don't like. Actually, you joined the faction when you picked up the ring. This is just confirmation that you're going to take some reaction penalties from the other native factions.
Sul Matuul tells you to consider carefully before declaring yourself Nerevarine. You are going to suffer HUGE disposition penalties with some native factions. Imperials won't particularly care one way or the other. Those that liked you will continue to like you, while those that didn't probably won't.
For Redoran, you will take a -4 modifier to their disposition (-3 is "Hated Enemy"). If you are a member of House Redoran, however, you'll actually gain a few points of faction rep. For the Temple, you will take a -8 modifier. "Lower than the excrement of the bacteria feeding on the whale dung on the bottom of the ocean" would be pretty close, but it was too long to fit in the scripting engine, so they just settled for "Nerevarine". If you are a member of the Temple, however, you will actually gain a few points of faction rep. Hlaalu will be more tolerant, being more closely aligned with the Imperial mindset; Telvanni will continue to dislike you just on general principles; and the Morag Tong will remain neutral.
If you still have some business with the native factions that you need to clear up, this would be a very good place to pause the Main Quest and take care of that business. If everything is hunky-dorey, go ahead and ask him to name you the Urshilaku Nerevarine. If it's not hunky-dorey, let it drop and you can come back and pick up at this point later.
In the pre-patch version of the game, the native factions seemed to take a disposition hit as soon as I talked about Nerevarine. I don't know whether this was handled in the patch or not, but it might be wise to just not even bring up the subject until you're ready to declare.
Just as an aside, the requirements to join the Nerevarine faction are Personality and Luck at 1 or higher; and Speechcraft, Marksman, Restoration, Block, Mysticism or Spear at 1 or higher. There are two ranks: Nerevarine and Nerevarine. You must have a minimum faction reputation of 1 in order to be promoted. Since you are the only person in the faction, I guess it's a self-esteem question. Do you like yourself well enough to give yourself a promotion?