I was also attacked by someone with a knife many years ago. The thing with aikido, is that you train your body to react instinctively. Luckily for me I survived it with only two very shallow cuts (more like scratches) - making a choice of what to do was impossible, it was just complete reaction. Maybe being held up with a knife is different since you have more time to think and are able to do different responses.
I think this illustrates what I have said in previous posts about the difference between reality and training. In reality your subconcious has to weigh up a complex situation very quickly and assess comparitive ability, risk (and possibly ethical viewpoint). In the dojo we just look at the attack.
Personally I don't think there is a right or wrong way to react in a hypothetical situation - real situations require on the spot judgement which can only be aided, but not specified, by forethought.