I didn't see it that way. Real challenges aren't friendly like that. You can hear the wrestler say "no striking", "just wrestling." The Aikido practitioner is probably a really good one and the teacher there probably wanted to expand his understanding of Aikido when going against a different fighting style. No matter what style of martial arts you take, you can't fight all fighting systems with the same approach. The fact that this was done in front of students means that the students are able to learn as well and can see the fight from a different perspective which will give the Aikido practitioner more information to use. Most likely the head teacher of that school isn't the one wrestling. As the head teacher it's best to see the fight from the outside. At no point in time in the video did the school lose face nor did the Turkish wrestler.
The Aikido students are also video taping as well, which will make for a good study reference and will help make their school better. The students were probably impressed to a point. But most of that clapping is probably out of respect and good will, especially since it's not a real challenge. I wouldn't be surprise if they build a relationship with this guy in an effort to learn more about how his style works so that they can fine tune Aikido to deal with similar wrestling movements.