To begin with I'd like to say that this debate has prompted much better posts on AikiWeb than has at Aikido Journal. One thing I have noticed however is that a few Aikidoka posting on both sites seem to support competition on the grounds that it is more realistic, more 'street' and thus a good way to test your techniques. I really don't think this is true. A friend of mine, who also does Aikido (he's a 1st kyu), worked nights for a security company during university. The company provided the security guards for several fast food chains, in two of the largest cities in N.Z. While he was working one night my friend saw a couple of guys breaking bottles and messing with cars in the parking lot, so he goes over and tells them to leave. One of the guys gets in his face looking for a fight. My buddy kept his cool and just tried to talk them into leaving, but they wouldn't leave, so he said he was going to call the cops. When he said this one of the guys screamed 'I'm going to kill you' and grabbed him by the throat. My friend reacted instinctively and knocked the guy's hands away and punched him right in the face, breaking his nose. The guy did not flinch at all and tried to put a 'sleeper-hold' on my friend, screaming the whole time. My buddy bit down on the guys arm hard enough to draw blood, grabbed and crushed the guy's family jewels, then ripped out a handful of the guy's hair and scalp and did ikkyo on him. While the guy was bent over he kneed the guy in the ribs and broke them, then slammed him head first into a concrete pole. The scary thing is this guy was so doped up he didn't notice anything my friend did to him, the only reason the fight stopped was that his friend dragged him away.
I don't know any kind of competition that could provide anything like realistic attacks that you might face on 'the street', and I don't know of any MA that can provide a perfect defence against attacks in the real world because ANYTHING can happen. If you want self-defence applications for Aikido competition is not the answer. In my opinion: ask your teacher. Question them about attacks that worry you and attacks we don't traditionally focus on(headbutts, chokes, knees), where and how to strike an opponent etc... If your teacher doesn't know ask around or think logically (i.e. a drunken assailant has a full bladder and overworked kidneys so those would be good places to strike). Nothing you learn in Aikido can make invulnerable in a fight but the knowledge you gain combined with the fear and adrenaline of a fight situation could save your life.
However I think the best self-defence advice possible is: RUN VERY FAST. Self-defence Aikido should definately be your final step.
I sorry if this seems a little dark to you but I really don't think competition will do anything but give people a distorted sense of their ability to deal with a dangerous real world situation.
Anyway be safe, and promote peace.