respectfully the highest ranking student should be teaching the class, thats the purpose of having a ranking system.
That is a very bold statement. Perhaps it would best be restated as "that's one possible purpose
of having a ranking system."
In order to test an nine-year-old child for a kyu test, I asked him to run the class, from bowing in, running warm ups, basic exercises, ukemi, and then demonstrating his techniques---picking an uke from the line, demonstrating as nage and as uke---and then asking the class to practice with a clap of his hands. He joined the practice then, and I wondered about. I kept close watch on him and the time, letting him know quietly when it was time to send the students back to the line and to demonstrate the next technique.
The students range from 8 to a bit over 40. Everybody is comfortable with this and enjoys it because that's what I teach them.
If I don't have a varied warm-up in mind, I'll ask for a volunteer. It's hard sometimes to catch which kid's hand goes up first! I'll generally ask students to demonstrate techniques to their peers when they're getting close to test time and the technique is one from their own requirements. They're free to pick a peer or even to pick me as an uke for their demonstration---no problem. After all, when I demonstrate, I'll pick an uke, perform the technique from different angles so everybody has a fair idea of what's happening, and then give my uke a chance to toss me around a bit with that technique.
An interesting exchange happened once during a warm up: A child was leading and went off track from the typical order of wrist stretching sequence. The child's mother interrupted him suggesting the "proper order" and left the child a bit confused and on the spot. I interjected: "There is no fixed proper warm up in aikido. As you progress and work with different instructors, you'll see that everyone does things different ways. Always respect and follow who is at the front, regardless of what you think you know."
[That's not to say that if a kid gets lost that the audience won't give hints about what to do next. There are also plenty of occasions to remind the children to respect their elders and their ranking peers, etc. That was just one relevant example.]
So, what am I doing wrong?
I think Ron Ragusa recently wrote an AikiWeb blog entry about knowledge getting in the way of learning. I recommend everyone giving it a view.