One thing about the "O" in "O-sensei" that some folks outside of Japan don't know is that it's not the character for "dai" meaning "big but, rather, "okina" meaning "venerable old man."
Another thing most people outside of Japan don`t know is that using the terms Osensei and Wakasensei is very common when two generations of "sensei" work in the same place. There is a dental clinic in my town run by a father and son, both named Hayashi. To avoid confusion, one is Osensei and one is Wakasensei. This has to be the origin of our "Osensei" as both Morihei and Kisshomaru were active in the dojo. However, contrary to what Jun wrote, our Osensei is referred to with the character "dai" in Japan (at least in Aikikai literature.) I am very interested in learning when the change took place. (Professor Goldsbury?)
A couple more points/opinions:
1. "Sensei" is not a title, it is a word of respect that denotes a relationship between two people. "Shihan," "Shidouin," and the like are titles that are given from top down. That is, a group or person with some kind of power hands down the title, and whether we agree or not, that person is Shihan and can refer to him/herself as such. "Sensei," on the other hand, is given up. That is, I feel respect for someone and wish to show it, so I call that person "Sensei" because I am lower in status. I think it is much more personal than a title.
2.As to whether most of the current Shihan are direct students of the Founder or not, I understand this argument to be at its core, a disagreement of who got the "real" teaching, and exactly how much time did the Founder spend at Honbu vs. Iwama. It seems to me that we may never really know.
3.I think that the lack of emphasis in Japan on the Founder is due to the idea that we learn Budo through touch. My teacher touches me (does techniques with me) and THAT is the teaching. I think that this is reflected in the Aikikai`s decision not to publish "Budo" in Japanese. My personal opinion is that both sides are necessary; a living teacher and a study of the teachings of the Founder.
Sorry about the length,