A couple of points:
1. At the time Takeda was teaching, koryu was still very widespread. For example, Kobayashi Seiko of Toda-ha Buko-ryu believed that, through her teaching in the school system, she had taught over 10,000 people in her life. There was a profound decline of budo in the Edo and Meiji periods: EDO - because the daimyo demanded that many schools consolidate to make "han-kenjutsu" - this is the roots of kendo MEIJI - a rejection of feudal culture and an embrace of European culture led to the abandonment of many schools. Then, there was a renaissance. First, through modernization (judo, kendo, etc) and then, as Japan became outward looking/Imperialistic, there was a revival of interest in older martial arts. In the early 1900's through WWII, many koryu were quite popular.
2. If you read the article on Takeda Sokaku, called "Ima Bokuden
", you will find that Takeda definitely taught police agencies. Furthermore, Takeda's cachet WAS that he was considered one of the last of the old-time bushi. Yes, there was a lot of koryu around, but Takeda had something special. AND - Takeda considered himself a bushi--as did most old-school people. The law may have phased out the caste system, but people still maintained it. This is true, even today. A friend of mine was in a very rural area, and had to contact a family regarding an investigation. He spoke with a woman of about 60, who proudly informed him that they were a bushi family. Asking about a house within view, the woman said, scornfully, "Oh, the new people." They came here 400 years ago, and were elevated to bushi status then. I know nothing about such people."
3. What people do not understand is that Ueshiba was not considered a "modernizer" in the 1920's, 1930's. He was considered an exemplar of old school martial arts, his skills those of times past. In fact, there is good reason to believe (I cannot find the citation right now) that the entire thesis of Saigo Shiro preceding Takeda as a student of Daito-ryu was a fabrication in the 1920's by the Kodokan, so that they could say, in counter to the increasingly popular Ueshiba that, "we do that too." (I want to prevail on the person who did that research to go public with it - it's fascinating, the level of historical rewriting that the Kodokan apparently did, that is countered by newspaper accounts - - or their lack - -in the 1880's.
4. Aikido's real revolution--which I believe has filtered backwards into modern Daito-ryu is reciprocal, non-competitive practice. (I go into a lot more detail in a new chapter in Dueling with Osensei, 2nd ed - out in 2014). We focus too much on Takeda's paranoia. I would wager that reciprocal practice was enacted amongst Takeda's students, and this further amplified by Ueshiba. This is revolutionary. With all the wonders of koryu and its teaching methodology, it perpetuates a feudal mindset. Aikido, through reciprocal practice establishes that, within its context, each can become the other's uke (and, btw, if one is training in some form of internal training, this is undeniable).
5. In this sense, (again, I go into much more detail in the book), if I am senior and throwing you, a beginner, although you are "taking a fall," I am still uke to you. Takeda was, in this sense, taking ukemi. He received the attack of his students, and taught by "what happens next."