This is an interesting question. Coming from an area with a small population and two dojos (mine and a peer) the questions hits "close to home". I think Sensei, generally, your premise is sound but we also need to ask how the student is being taught. I will get into details via PM.
I guess that is my point... The question is whether, in a small town, there needs to be two dojos? Or, if there is some wonderful teacher of T'ai Chi, maybe there should be no dojos. Maybe everyone would be better off doing the T'ai Chi with the advanced teacher, rather than muddling along doing Aikido. Is there some inherent value to doing Aikido, regardless of the quality level?
I guess I come down on the side of some training is better than no training. If I am the only game in town, than I simply try to do my utmost to keep getting better so that I can deliver the goods to my students. If the only other game in town is some wretched McDojo, I would feel like I was doing a public service "saving" the public from that experience.
I am simply saying that I think a certain amount of self reflection is called for. If I can't honestly say that my students at San Dan are equal to or better than I was at San Dan, that they have every chance of being as good or better than I am when they have trained as long, then I have not been doing my job. I see this all the time and I think we should be looking at it.
As for the idea that organizations and Shihans overseeing them accomplish this, well, I would say the evidence in a lot of cases is to the contrary. I am not going to get into specific teachers or organizations. This is a matter for self reflection. If you think everything is fine, then don't worry about it. I don't really think that students should be worrying over much about these issues. It is for the folks who have set themselves up as teachers do decide if they are really doing their jobs. One can look at the "product" and see the result of ones efforts. It's sitting right there in front if us. It is a simple question... Are my students as good as I was when I was at the same level? Do I know what I should know to teach what is expected by my own teacher or organization. If the answer is no to either or both of these questions, then something is not right.