I think that Aikido is misunderstood in the world of Aikido, much less the wider world of martial arts. The word is used to describe training methodologies that differ quite significantly depending on how one traces ones lineage back to Ueshiba M.
Yes it is misunderstood. We refuse to communicate with the rest of the world or even take notice of it, we don't do our own talking; we let people with no experience of Aikido tell the world about Aikido. It's hardly suprising that we have the reputation we have; it's what comes of refusing to harmonise with the situation: conflict, confusion and ignorance.
I think Alex has a very valid point here. Over the years of training in all sorts of multi-style seminars I often see a recurring trend - there are 2 types of Aikidoka that show up (and this applies to some other Budo as well) - those who have faith in their abilities and are honestly willing to learn - and those who do not have faith in their abilities and who would really rather return to the safe environment of their home dojo.
The ones who do not are rarely seen outside of seminars of their own style or own dojo. They are quite insular and unwilling to interact with other groups who have no ill intent but just want to train honestly. In a real sense these groups train daily in a shared illusion at their dojo and do not want to endanger that illusion by exposing themselves to others outside their dojo and/or style who might start critiquing what they do. Their idea of sharing is for the outsider to drink the kool aid and share in the illusion.
Then you have those who actually have some skill and have the confidence to not be afraid of practicing outside their paradigm and sometimes risk being schooled by someone else - they train all over the place and though they may not be masters, they give an honest impression of what their training is all about because they explain only what they understand and leave the rest to others who are more qualified.
Sadly, for a lot of Budo where there is an empty handed aspect, there will be questions surrounding effectiveness of technique etc. (i.e. how does that strike/throw/lock work). The question is a valid one since in Aikido we go about throwing around each other and locking joints - it looks good, so others want to know if it really works that way. Here is where the problem in communication starts as many have no idea why techniques work because they've never really executed a technique that has worked without the total collusion of their partner. Communication and sharing with someone from outside your paradigm often goes downhill from there in my experience.
In some sense many Aikido practitioners do not understand the jutsu or martial science behind what they do. As a result they misunderstand their own training, spreading that to others who know even less.
Just some thoughts.