I always encourage my students to keep going. In the real world of performing live music you don't get a chance to start again - we all make mistakes and part of the learning process is to ride through those errors so I figure you might as well take this on board at a fairly early stage.
One of my exercises for beginners is to concentrate on the right (or strumming) hand while playing a chord sequence and just keep going regardless of any mistakes the left hand makes in forming the chords - I find this works well to get rid of the mental block you might get by thinking solely of the correct chord shapes and hence stop between each change.
I also get the student to look at their right hand rather than left while doing this excercise.
Hope this helps,
Nick Marchant