To take things in reverse order.
First, sorry, yes, I think the kata are essential to teaching martial arts in the sense I have in mind. However, your problem may be that we don't define, "martial arts," in the same fashion.
Second. The flaw in the logic is that training people to fight in a ring, and then testing to see whether they fight in a ring better, has nothing to do with reality "on the street." Again, I have no interest in learning to fight in a ring, a good thing considering my talents. However, I also don't believe that ring success necessarily means jack "on the street" (one of the most overused phrases in martial arts), except that--and as I've previously remarked about nineteen times--a professional fighter is very likely to kick the *** of me and thee.
Third. The flaw in the logic here has to do with teaching. OF COURSE, ultimately, all the bits and piece of the systems are meant to drop away--for the same reason that Rembrandt quit thinking about brushstrokes after awhile. Then, you really do have what APPEARS to be, "the system of no system." FINE. OK. GOT THAT. However, nearly always us humans need the forms, sets, techs, etc, to get anywhere near that point. When you jump the gun, you most always get mush. Or occasionally, you get someone who has become such a lethal weapon that, as Mr. Parker suggested, they might as well have gone out and bought a gun. I've no idea whether Joe Lewis is a good guy or not. I'm talking about us mere mortals. Is Gene LeBell a martial artist? Oh, hell yes. Hint: you could've blown up my arguments a lot easier, had you mentioned judo--which mostly doesn't have kata?
Fourth. There is an explicit, "plucking," applied in the extension to Raining Claw. However, it is applied to an arm, and I don't know if this is the same action mentioned as part of KM.
Fifth: as far as I can see, the "martial arts," being discussed are ring arts. I do not believe that that is the be-all and end-all of martial arts.
Sixth: should I do more sparring? Sure. Shoul you do more forms? Probably.