I found this article by Yoshimitsu Yamada Sensei, written in 2005, to be very enlightening:
In particular, these paragraphs:
You might notice after reading the Rules that the regulations are not very clear or well defined. It also shows that the title or name, Shihan, itself is uncertain and I'd like to explain why I say that. First of all, when this regulation was handed to us several years ago, we, the Shihans, decided to wait to adapt this system because it was very questionable. For instance, it used to say in #4.2 that you have to wait 10 years after 6th dan to qualify. Headquarters has since changed it to 6 years. But also around the same time Headquarters appointed some American Aikido instructors not related to the USAF as Shihan without letting us know.
Just recently we changed our minds and adapted this system so I had no hesitation to apply for some qualified instructors from the USAF for Shihan. In the future, the numbers will increase.
Now let me explain what Shihan means in my culture. Please understand that I am not trying to make Shihan seem unimportant, but I must express it in the terms that the Japanese people use the word and what it actually means to us. Shihan is simply another way of saying Sensei. As a matter of fact, it says in the Japanese dictionary that Shihan is used to call the teacher in a particular field or profession such as martial artist or cultural leader. For instance, you call a school teacher in Japan Sensei and you call a teacher of martial arts Shihan. When I make an application for an official document it's proper for me to write Aikido Shihan rather than Aikido Sensei.
I hope that shed more light rather than generate heat..