This just seems to go round and round. So. . .
Here is my take on it and why this entire brouhaha is a waste of valuable time.
Stephen K. Hayes trained with Soke Hatsumi in the 1970's. He introduced the art to the US and western countries in the 1980's. At that time he was in the good graces of the Bujinkan and was a very active member and a key individual in the growth of the Bujinkan. In the 1990's he began to want to develop the style to fit the current methods of attack that people would be defending agains (lunge punch is laughable even in a bar fight with bubba Foxworthy, the super red-neck!).
In standard Japanese fashion, Hatsumi neither condoned nor disagreed with this idea, but simply said he should do what he felt was right (in Japanese culture that is similar to "you do what you gotta do, but don't let the door hit you on the way out.")
Hayes moved off in his own direction, and stopped paying the bujinkan dues and promoting what he taught as Bujinkan. Soke Hatsumi removed the name from the wall as a visible symbol that he has moved on and started his own thing. End of story.
I went round and round with this myself for over a year and here is what I finally decided:
A) The Bujinkan Ryus are wonderful and very effective. (Most students are NOT experienced martial artists, so realized the next piece only refersto those who have no outside experience, I know there are exceptions) The current method of teaching is so full of "find what feels right for your body" that the effectiveness of the art is being compromised. People with currently effective and skilled abilities must water their techniques and skills down to fit into the class. Training with a partner who insists you throw a lunge punch and then only throws one at you reduces your ability to build effectiveness in a real-world altercation.
B)Hayes has tried to add current fighting styles to the responses of the original systems. He is a bit too full of himself and has toned down the harshness in return for allowing for legal repercussions (the thief sues the homeowner who shot him and wins, etc.), so open hands and takedowns are emphasized over the multiple fists he was originally taught. He seems enamored with the Godai, which WAS in the 1970's bujinkan, and has structured everything to match, when the original was merely a method of teaching types of responses, not a system of categorization. (watch the old tapes and listen to the interviews, it was there, just not nearly at the level Hayes wrote about it.) He also over-emphasized the "personal student" part, which is sort-of true, since the growing bujinkan forced new members to train with Hatsumi's students, with him overseeing them and only occaisionally working personally 1 on 1. But he wasn't and isn't the last personal student of Hatsumi. Current video tapes show Hatsumi training in his small dojo with 8 - 12 students as well as training in the big hall with 40 to 200 students.
So, in the end, here is what I decided to do => I am training in To-Shin Do while studying and practicing the Bujinkan curriculum as a supplement. I am a member of both and a proud of it. When I see a technique in To-Shin Do, I find the counterpart and practice both variations. After all, Soke Hatsumi always emphasises the variations possible of every technique is more important that the exact motions, so I take that as: Bujinkan is the source, and the To-Shin Do is just a variation. And, of course, I train with partners who will throw current/real attacks and traditional attacks alternatively, so I can learn to respond to any attack. My one rule is NEVER aim to miss. Go slowly at first, but aim at the real target and if I miss, I get hit (slowly and softly). Then, as skill and muscle memory is developed, go faster and trust each other to stop before damage.
I also believe that both Bujinkan and To-Shin Do can be competative, since all modern variations (judo, karate, BJJ, etc.) are competative. The difference is building skill enough to stop or shift to lesser vulnerable targets, which most modern arts do. But that's another topic