I think these are 2 separate things. You are right about the fear though. Application is definitely a higher level. There are things that I learned through application (through sparring) that wasn't possible to learn through kata alone. Kata informs Application. Application clarifies kata. Sparring validates Kata and Application.All the BS gets exposed when you're trying to KO the other guy & he, you. That's why, it's a higher level than just doing kata/forms.
1. Kata -> Application ->Sparring
First the student learns how to throw a jab correctly -> then the student learns what it's used for -> Then the student learns how to apply in the context of sparring.