But, in reality, he is just a hero in his own mind, and, of course, also in the minds of those naive enough to uncritically accept his version of the story. Ultimately, all Dan did in this situation was to change his own mind. And, ultimately, that's really all Aikido is about.
Excellently put, although I suspect I read this with a very different 'spin' than I think you wrote it with. If Dan felt like a hero in his own mind, then masakatsu agatsu (true victory is victory over ourselves) and he is indeed a hero. Indeed, AiKiDo is only ever about changing yourself. Or, if you like, AiKiDo is steeped in the understanding that all you can ever really change is yourself. You can think of it less as a choice AiKiDo makes to focus inward and more as a realization that that is the only place to focus.
AiKiDo teaches us (well, at least it teaches me) that my tendency to lose in conflicts arises fundamentally out of my tendency to perceive things as conflicts. Dan's insight was (at least this is how I understand the story) that no real conflict needed to exist between him and the other instructor. You can only lose that which you value, and it doesn't sound, from Dan's story, that anything he valued was lost. AiKiDo teaches (me) to be careful about the things I choose to value: the more things I hold on to, the more vulnerable to seeing situations of conflict and loss that I become.