Interesting thread, especially as Peter's last reply to Ian Dodkins shows at least three different cultures trying to use the same word. It's helped clarify some of the answers posted by US/Canadian aikwebbers in other posts.
I can quite happily understand Peter's use of "sensei" in Japan. However, the "mister" and "sir" analogy sort of breaks down for the UK. I can't think of a single instance I've used the term sir other than when adressing a person where that is their title (in which case, it's Sir ...). Outside of our public-school system, sir, or other honorifics, are not in general use. This is why I think sensei in the UK is normally used to denote the formal relationship in the dojo.
(for the record, I use the term sensei in exactly the way Ian has already described)