I think the problem is not with Aikido training as originally intended by Ueshiba M. but the later superimposition of pacificst idealism upon something that was originally intended as a form of Budo. Ueshiba M. was not a pacifist. This information can be found in interviews with his son and can be attested to by many of his deshi.
Folks talk about pre-war and post-war Aikido, often indicating that the former had a more live martial edge and the latter was more "spiritual" in orientation. The question is, even near his death was Ueshiba M.'s Aikido still martially sound (i.e. would you be thrown/locked/struck by him even if you did not want to be)? If the answer is yes, then it means that even though Ueshiba M. evolved in his spiritual maturity in his later years, it was not at the expense or exclusion of his martial edge.
If the above is true then how can we justify training in a non "live" manner. How can we support the practice by many to degenerate Budo training into dance and falsely enforced harmony as a result of dojo norms instead of through honest and true understanding of Aiki waza?
How can we manifest harmony with a serious aggressor who is bent on our own destruction if we do not first have the physical, mental and spiritual training and understanding of Aikido to deal with that aggression? The answer is: we cannot. It means that the only "harmony" that the majority of Aikido practitioners will ever understand or experience is that which is imposed in the dojo by rules, since the skill level and trainign methods needed to maintain harmony in any sort of resistant situatiojn are simply not developed. Iow true harmony and attainment of skill is sacrificed for a false harmony and attainment of "skills" that can only work within the controlled, protected environment of the dojo.
It is interesting that competitive Aikido is often bashed for having "rules" which "limit free expression of technique" when in fact those who train in a dead environment are using rules to excuse poor technical execution (for the sake of "being harmonious") and to force Uke to be unnaturally compliant even when they know that the waza will never work if a little resistance was used. In this case the rules that mandate harmony limit the free expression of one's will, i.e. the will to resist the technique and reveal your partner's flaws so he can honestly evaluate himself and find truth through his training.
I submit that Aikido itself does not need to change to allow for more competitive elements, sparring etc. The technically sound Aikido I know and have seen in other schools already exist. Environments where "live"training is practiced are found in many Aikido dojo across styles. The sad problem is that the "general" view of training and possibly the majority of training paints an opposite picture of what is supposed to be a highly efficient form of Budo where spiritual development is attained through the practice and deep understanding of physical technique.
Just my 5 cents. Sorry for the mini rant.