Re: How to deal with my sempai?
I can understand your attitude that you're a little nervous with hm in the class. I wouldn't give up my teaching spot if I were you. His presence could inspire you to raise the bar for yourself knowing he is watching!
I think you should look at the bright side. He's attending your classes, which shows he respects your accomplishments. You never know, he may prefer for someone else to lead the class and to just train. A teacher doesn't necessarily have to be the most qualified person. I'm sure whoever he works with appreciates him as a training partner with his knowledge and experience.
Someone is needed to lead class or it is not a class. You could call him as uke frequently, to show your respect. I wouldn't be afraid to ask his advice if you are unsure about something. People generally love being asked for advice and it shows that you are able to handle different points of view in Aikido. The students will appreciate your example of how to behave in such a situation. If you think he'd enjoy teaching a class, you could ask him about it. If he wants to do that you can find out if that is permissable.