In any case, it seems Osensei didn't teach aikido much with a live blade.
I was told that he did, until an lethal accident happened during a demonstration.
But I can't verify this.
There where/are teacher who use live blades in context of their aikidō.
Asai Katsuaki and Noro Masamichi are known for using shinken during practice.
Christian Tissier used a iaito for the batto jutsu as far as I know. There is a video of this somewhere out there .