I trained in Burmese Bando prior to training in Aikibudo. Burmese Bando is the cousin to Muy Thai. I trained in Bando for almost five years. While sparring with a guy, I snapped a front round house kick and dislocated the guys left arm. The kick landed perfectly. It wasn't not done intentionally, but let's face it, people will get hurt in real martial arts training. So if you have the fear factor of real training, then perhaps you need to stick to the pretty demos. I rather take the risk of injury, take some bruises and cuts, verses pretty flowery demos. Demos are rehearsed showy, look mom I'm the man and look good. I'm not interested in cool looking demos. I want to learn how to defend myself.
Different strokes for different folks, I reckon. You're both making valids points in my opinion. There has to be a balance between intensity and caution. Clearly most "martial artists" aren't training to hurt each other or there wouldn't be any training partners left. I suppose we each have our lines we draw as to how much risk we're willing to abide by. On one hand, you certainly learn how to handle a hit a bit better when you get hit often enough...on the other hand, a rotator cuff injury (or other) can seriously affect your ability to defend yourself in the future. I've had plenty of bruises from Aikido and even bled on the mat...doesn't necessarily mean I gained anything useful. Conditioning the body with impact training has definite benefits; so does sensitivity training.
Demos give an idea of what can be done. Picking them apart is usually a waste of time. It's often like looking at a movie and complaining that it's not real.