Hi Ted - It is just plain wrong that Uehsiba is not seen to be doing atemi when he was older. I'm not sure about the photos, but definately in video footage I have seen several atemi and even a kick! (though he never made contact).
Within traditinal aikijitsu there are 3 stages of progression, where atemi tends to be focussed on early, and later almost entirely removed. In my mind aikido is a structure of body movement in which you do whatever you want. The aikido techniques are so well set up for delivering vital point combination strikes that I'm suprised that there is this idea that striking is not part of aikido.
I think failure in real situations is partly down to a lack of understanding of the word 'blending' and thus someone tries to force a joint lock on, as well as an inability to see openings for atemi.
An interesting story is when Uehsiba was challenged by a high ranking Judoka, and did a shuto to the jodokas hip, permanently damaging it. Ueshiba developed a TRAINING METHOD. If it is to be used for self-defence I think the openings and atemi opportunities are an essential part of the instruction. However these are rarely integrated directly into the paired training as we are mostly trying to learn the hard bit (blending). Aikido can be adapted from a situation where you need to b gentle, to a situation where you can kill. The standard training is just the core tool box.