The problem with MMA at the moment is the general public's ignorance of it and as these are the people any Olympic city has to sell the tickets to there would be big problems. Talking to friends who were at the UFC in London the other night a great many people are turning up expecting a huge bloodfest of what we call car parks fights. One friend was sat with half a dozen empty seats beside him when half way through the night some lads came in and sat down, some English the others Irish. They asked him if there were any English fighters on it, (der!) then when Bisping had caught his opponent in the unmentionables the Irish guys laughed and said they knew the English had no balls! he had to point out that Bisping was the English guy, his opponent wasn't. There were loads of chavs dressed in Tap Out who had no idea what they were looking at booing every time a fight went to the floor and shouting out the most stupid comments showing their ignorance of what they were looking at. We don't get these idiots coming to any other promotions just the UFC, I guess thats because of the name. The night wasn't a sell out anyway, it never is. One wit on an MMA site suggested that to fill the empty seats the UFC trawl through the local pubs offering free tickets. Now thats fanciful but the UFC has moved people from the furthest away seats before on shows here to the cageside to fill them up so it looks better on television.
Other friends got fed up of the chavs asking them questions which showed they had no knowledge of MMA at all.
These aren't the people nobody wants at the Olympics and we don't want people thinking these are the normal people who follow the sport, these are the UFC chavs.
On the other side you have the 'anti blood sport' types who want MMA banned and would be horrified if it was even suggested it goes into the Olympics.
As in Judo which has decided it's Olympic compettion has to have spectator appeal ie lots of throws and less 'boring' groundwork I imagine we'd end up with some sort of kickboxing with the occasional throw and groundwork not longer than a minute or two, perhaps a rule saying subs within a minute or be stood up! The standard 4 oz gloves would be changed to those awful padded training ones, head guards, body shields, shin and foot pads compulsory, short rounds. Refs stopping at fight at the slightest hint of blood. Definitely no cage or ring, mats like Judo and TKD with judges at each corner. Probably two refs instead of one. Points given when an opponent touches the other, no KOs, maybe even disqualification if you draw blood! perhaps even semi contact or no contact at all lol!
If we look at some of the forums, we'll often see MMA folks who do what you described about the folks at the London show. These people, along with the other uneducated ones, ie: the ones who think its nothing but a blood-bath, are the proverbial 'bad apples that ruin the bunch,' IMO. I mean, its kinda hard to judge something if ya dont know what it is.
I for one, enjoy the UFC. My wife can attest to the rather large collection of fights that I have. A few years ago, I went to an event here in CT, and enjoyed it very much. Even got a few autographs (Randy and Tim) and saw Chuck. Good times!
As for the watering down....I'll use TKD as an example. People bash it left and right, saying its nothing but a sport, yet they talk about the combat side of it. While I dont do TKD, I can't help but agree with those that say its nothing but a sport. If there is in fact a 'combat' side to it, its rare that you see it. So, if the art of TKD was 'watered down' for the sake of sport, the Olympics, etc., it seems to me that if MMA was to enter the Olympics, it would probably be as you described.