Firstly- the notion that a koryu cannot use dan/kyu grades is absurd. Daito-ryu uses them nowadays (in concert with their old license system), and I don't think you'll hear anyone (credible) claim that they're somehow "less classical" because of it. I wonder how someone could likewise state that Daito-ryu would lose any claim to its (mightily impressive) heritage by adopting it.
The distinction between "do" and "jutsu" was practically non-existant until after WW2. Prior to this, and especially prior to the Meiji period, they were used with virtual interchangeability, and sometimes omitted altogether. This is particularly true of the iai schools, virtually none of which identified themselves as anything other than "iai" ("Itto-ryu iai", "Muso Jikiden Eishin-ryu iai", etc.).
Many schools didn't even use titles to describe which methods they taught- Araki-ryu being a good example. One went to learn the subject the way that school taught it- whatever weapons or methods they happened to teach.
The distinction came with polarization. The martial arts became polarized after the Meiji period. Those schools that adopted "do" where they had previously (or in previous incarnations) used "jutsu", did so to dissociate themselves from the defunct and unpopular samurai- not to mention, to avoid government-ordered oblivion. When the "return to traditionalism" hit Japan in the 1920s and 1930s, some schools became ardently "jutsu" in order to affect the aforementioned "return". The distinction is an artificial and semantic one, which has lasted for a sufficient number of decades to become "gospel".
So yes, while there is a small distinction (in the koryu sense, anyway) between "do" and "jutsu", it is just that- a small difference. Over time, the difference becomes even less significant, as life asserts itself and the various aspects of budo blend together in the practicioner and become indistinguishable from one another. Those who make a major difference out of it, need to spend less time analyzing names and words, and more time living budo.
Leave it to an academic to speak in broad declaratives about such a complex, nuanced, and rich subject. IHS's refrain of "This is koryu, this is gendai, and never the 'twain shall meet" is the opinion of folks who fail to realize that history does not pause while the reader concludes one chapter and begins the next. It's the opinion of people who, rather than having twenty or thirty years of experience, have one year of experience twenty or thirty times over.
Nowadays, you'll note that many of the seasoned practicioners omit it altogether- "aiki" instead of aikido or aikijujutsu, "iai" instead of iaido or iaijutsu, "naginata" instead of naginata-do or naginata-jutsu, and so on.
This is, to my mind, a very healthy "return to traditionalism"- it harkens back to when the real practicioners didn't give a crap about artificial distinctions, because their practice served more than a single purpose. It wasn't just technical (or "jutsu"), it wasn't just about enlightenment (or "do"). It was an all-consuming, life-affirming, all-encompassing practice which supported and nourished their bodies, minds, and spirits. It was their work, their sport, their duty, their spirituality, everything, all wrapped up into one package.
It harkens back to when budo was real life, rather than a hobby or an academic pursuit (i.e. "hoplology").
So, while the IHS folks are busy contemplating which method produces "more superior" people, I'll be at the dojo, living and breathing the practice of bu(do or jutsu).
