My sensei was also a student of O'Sensei and he also said that O'Sensei had said you should only start ki no nagare when you are third dan. You have to have solid technique as there is no point in trying to run before you can even walk.
A couple of years ago I attended a seminar by a visiting aikikai instructor. His aikido was powerful and graceful; however, he kept emphasizing the basics and how everyone was making basic mistakes when attempting ki no nagare.
As one sensei said to me if you just teach kihon to beginners they get bored and leave. This is the now generation who want instant gratification and it leads to poor aikido.
Your last comment sad to say is indeed the case. cheers, Joe