I'm the original poster, so I thought it'd be time for me to chime in again. So far, good discussion! Thanks to all who have participated. This is indeed a hot topic, touching on matters that seem to be on many other peoples' minds as well.
My main concern is over the future of Aikido in America. As I mentioned in the beginning, I am curious as to who will "take over" Aikido once the Baby Boomer instructors/sensei retire and how it will change Aikido in light of the current "fad" in the martial arts community: the MMA?
Personally, I think that the overly-commercialized MMA fad will fall out of style in a few years, just as a previous poster noted. However, the so-called "challenge" of the MMA to Aikido will have further reaching consequences because previous martial arts fads didn't have the power of the internet to keep it alive.
To put it colloquially: Aikido doesn't suck. However, if enough people say Aikido sucks over and over again, it eventually becomes subliminal, a sort of knee-jerk reaction. Example: all politicians are crooks & liars. Although there are many politicians who are indeed crooks & liars, not all of them are. In fact, many are honest and hard-working. However, it is indeed engrained in our collective subconscious to naturally distrust public officials. Get my point?
I do not think MMA is a fad, I think it is the new boxing. Within a few years it is going to be as ubiquitous as boxing in its peak. MMA has grown beyond martial arts. It is a full fledge sport. There are fighters now that have never taken a bjj class, or a tkd class, they learned to fight for the ring. They don't care if tkd works, or if aikido works, because those are martial arts, and martial arts are for dorks who can't do sports.
As for the future of aikido. I'm not too worried. My only concern is that as more people take aikido as their first martial art and become teachers themselves, that there will be application lost in the translation of theory. With the exception of the tomiki guys, most aikidoka do not put in to practice their theory. This is usually ok if you have a contact sparing background like judo, because you have a realistic idea of how a encounter works. However, without that experience, there is a high potential for things to be lost in the translation, or done a different way because it was easier, etc. Eventually leading to a watering down of effectiveness. Soon, people are doing something they are sure is ultra deadly, but no one has even tested it in 3 generations or more of teachers, and there is no way it would work.
This is why Matt Thornton's comments on alivenss are more important to aikido then MMA effect on aikido. Aliveness needs to be taken to heart and practiced IMHO. Anyone who has been in a full contact sparing match or even a resistance based drill can tell you theory and practice are far different then you would imagine.