Well if you ask me the transmission was broken right at Morihei Ueshiba.
I'm not trying to imply that I know better because chances are pretty good I don't, but I wonder how you could possibly know this.
He learned what he needed to know from his teachers, but he never created a pedagogical method to pass it on. The default pedagogy of mainline aikido was basically adapted from Daito-ryu without much thought about whether and how it should be changed to transmit the essence of this new art.
I'm not sure creating a new pedagogy would have necessarily made much difference. As I understand it, the method is basically that of apprenticeship, which demands one on one interaction to glean mastery. The information then trickles down the hierarchy: the more the senior students develop, the more the newer students develop. Furthermore, in my own experience, with the exception of training directly with sensei, I got to train with everyone at the dojo in the course of the first day or two; I got to take ukemi from sensei within several months. To my mind, this is a pretty good pedagogy for any single dojo. Beyond that level, pedagogy becomes less of an issue I think. That taken with Sensei Ledyards remarks about everyone's aikido being their own seems to make a pretty good fit for why things are done the way they're done. I'm more inclined to think the problem comes when other goals (like political ones, for example) get involved and diffuse the focus of the teachers and students.
The only criticism I can see about pedagogy as being valid has to do with obscure language or a lack of explicit instruction and feedback, particularly the feedback. Uptake on how to move/feel your way through a movement is a pretty non-rational, right-brained type of process though, which makes me think the bulk of the issue lies in intensity and continuity of training. Obviously when we use language to communicate goals like, "relax your shoulders and straighten your posture more," we're including logical processing, but absorbtion itself is still a pretty physical/spacial set of stimuli.
If people want to be better "fighters" or whatever one chooses to call it, they need to train with people who are better than them first and foremost.