Well, if we're talking authenticity and the authority to pass it on as such maybe the paperwork does have priority. This kind of thing can be seen in other older styles that have titles like Shihanke along with Soke.
From a skills pov, paperwork has nothing to do with it, nor with the value of the art itself. A martial artist is judged by skill. I agree with you. And skill is important. But from an authenticity pov, you need the paperwork. This is kinda like how you're not a doctor if you don't have the M.D. No matter how much medical knowledge you have, without the paper you're not a doctor. You're not a lawyer without passing the bar exam no matter how much knowledge and legal skills you have. Or closer to home: I am a bladesmith, but no matter how good I become at making katana (I don't make katana btw, it's an example), they will not be authentic nihonto, because I am not a licensed smith. In this case, we talk about transmission of a historical system that is still done today as it was then: only the people with the paperwork can make it authentic.
