Our dojo meets in a gymnasium attached to a baptist church. ... concerned about our rei to O'Sensei at the beginning of class. I told him, "I don't think that O'Sensei really cares if we put his picture out for every class, and even if he did, he would be just fine with it being put in the closet if he knew it would create harmony." ...
Take a roll of white butcher paper and some black tempera paint. Believe it or not, thin tempera paint is very close to the ink used in calligraphy.
If you want you can do calligraphy practice with it. Butcher paper is cheap, white, tough and comes in long rolls. Calligraphy is good for budo training.
Write the following characters with a round brush in thin black tempera paint, vertically.
Take some dowels and roll them with glue and wrap the ends of the paper around them to give something to hang it from and some weight on the bottom end. -- Hang it prominently in the center of the kamiza, and then place O Sensei's picture at the foot of it.
When they ask next time about your "idolatrous" ways point out the characters -- "juu--ji-dou" "Way of the Sign of the Cross". It is another name O Sensei used for Aikido in the Doka. If they ask what that is, exactly, tell them it's advanced lessons in turning the other cheek.
If Baptists object to that, they have other issues, and you need to engage them in deeper teaching. If they press as to the nature of the observance, tell them it is dulia
-- not latria
. Then they'll have to get out their Strong's Concordance and Greek parallel bibles -- and you will gain immense respect for your scriptural knowledge. Be careful to use the Greek -- if you use the equivalent English term for dulia
-- "veneration" -- they will suspect secret Catholic leanings.