Maybe for an experienced fighter, we could see someone training and be able to tell if they are good or not. But someone with no other experience (or only experience in a bad school), wouldn't be able to do that. Particularly in a school/style where there is no competition.Is it actually impossible to tell good Krav from bad? I doubt that.
I think almost any system is capable of turning out people with not much fighting ability, unless it weeds out the people who would become those folks. Competition systems (with real contact) will weed out people who just don't find it in themselves (but probably won't "fix" that about them). Of course, it's possible to just be teaching crap, which is more likely to turn out crappy fighters, but if a system is capable of turning out good fighters, then the issue isn't the system (meaning the system of techniques). It's the instructor, and possibly the organization.
At that point, there's nothing for the newcomer to compare it to (only other krav schools, but you don't know if those are good either), and no way to verify whether or not the instructor is actually good.
In my mind it's the same issue people point out with Aikido. You can go into an aikido dojo, and seeing compliant drills the sensei/master/whatever may appear to be really good, while in reality he's crap. Then you go to another dojo, and the instructor appears to be really good, and in reality he IS that good. As someone with no MA (or bad MA) experience, how are you supposed to tell between them?