Lorei - that is not the traditional Japanese method. That is a modern adaptation for large groups - hence, progressive.
Not exactly. Actually, many of the most powerful ryu were birthed in the Edo period. I've never seen "kata dancing," actually. And of the extant koryu, very little "flowery technque." Unfortunately, many of the writers have merely "run with" some of Donn Draeger's perspectives, and amplified them far beyond what he said, generalizing things with TSKSR as the baseline from which all that followed degenerated.
And there was a LOT of put-up or shut-up in the Edo period.
Here's something more accurate - and actually more interesting.
Most Sengoku period ryu were closer to practical - none were probably military arts in their pure form. They utilized combative training to hone an officer class (the vast majority of fighters in the Sengoku period were peasants who got spears and practiced basic tactics in unison, much like any military. It is also probable that some of these early skills had rudiments of internal training, but the influx of information on that subject really occurred at the very end of the Sengoku period and early Edo. Then again, just because a ryu doesn't have something in this generation doesn't mean they didn't have it in a previous one (reference Kito-ryu in HIPS, for one example).
As the Edo period progressed, YES, there were restrictions of all kinds. But more important to the development of the ryu, they PROGRESSIVELY reworked the older styles to adapt to the kind of combat they really had to be concerned about - duels. Therefore, the great schools of mid-Edo were primarily dueling skills. It was at this time that "a thousand flowers bloomed," - where sogo bujutsu, with a lot of weapons, fissioned in to ryu specializing in one or two.
Interestingly, when this fissioning occurred, techniques became more sophisticated (for better and for worse), just like boxing technique took a leap, when they eliminated cross-buttock and other hip throws (which led to the development of the hook punch, which wasn't even considered earlier, as round-house punches were countered with throws.
When this fissioning occurred, guess what - there was far more concentration on subtleties - among them Internal Training.
It is very likely that IT went far back in time - for example, there is some evidence that the roots of what became Daito-ryu were already in the Kyo-hachi ryu which developed into Chujo ryu - Toda-ryu - Itto-ryu (hello - Daito-ryu). There are, according to one practitioner/scholar I consulted certain terms that are common to every ryu that emanated from the Kyo-hachi-ryu line (btw - their patron saint is Kiichi Hogen).
Lorei, back to you. Traditional Japanese pedagogy is small groups or one-on-one, the higher levels taught either directly or in steal-this-technique fashion. But it worked for hundreds of years.
Takeda Sokaku, fwiw, was a progressive innovator, who in many ways, broke the classical model of teaching.
And finally, Akuzawa is, in many ways, VERY traditional in his approach - he's merely open about what went on behind close doors.