This question of the origins of bunkai is fascinating to me. I'm pretty convinced that the whole concept of useful applications is something quite recent in the history of kata. There are two issues here. One is the lack of reality of so much of what passes for "bunkai" and second is the entire question of what bunkai may have been handed down 100 to 150 years ago.
Regarding the first issue, (reality of applications), if one looks at a broad cross-section of bunkai associated with older traditional systems, one typically finds that these applications are simply not modelled on the way fighting actually occurs. Attackers routinely step in with on long step, freezing is a stance and striking to the mid-section. Second, there is just an overwhelming amount of bunkai where the self-defense application utilizes a single counter strike, often to the abdomen. There are dozens of examples of this in youtube.
The second issue regards what, if any, bunkai was passed down 100-150 years ago and earlier. I would argue, not much. Since everything was so secret, airtight conclusions are impossible. We have to look at hints here and there. A good example is the reference to Oyata. Yes he did study with two men after the close of WWII who taught him ti and kobudo. However, I do not believe there is a record of him learning kata from these two men. He learned kata from Nakamura.
The question should be not whether Oyata has good bunkai for a variety of movements in the kata that are part of his system. The real question is what Nakamura (and perhaps his senior students) passed on to Oyata. A related question is what percentage of movements of kata in the Nakamura system, does Oyata teach to his top students? I have had an opportunity to have discussions with a couple. And the simple answer is that Oyata has not taught bunkai, at least in any meaningful way, for a broad cross-section of kata movements.
Another example is Iha, a student of one of Chibana's top students. His system has preset sequences for a subset of the kata in his system. Some movements in these sequences map to what many might describe as useful, but quite a number, many might see as quite contrived. In most cases, the reality of the sequences suffer from the problem noted above, a lack of a realistic attack.
One of Zenryo Shimabukuro's students once wrote that he taught that he had four escapes from grabs. That was all he needed. Yet much of what modern bunkai is based on includes grappling and the use of movements to escape from grabs.
In no way, should my analysis, be taken to mean that the old masters could not use kata movements for self-defense. They can. Rather, I argue that these old masters may have only used, and taught, applications for a very small subset of their set of kata (7-15 for Kyan systems, 11 for goju systems, 15-27 for Shotokan, up to 50 for Shito Ryu)
I am also not arguing that the lack of application makes the practice of kata meaningless. On the contrary, I believe that the practice of kata, regardless of it's use in fighting, is quite beneficial. It increases strength, speed, balance, blocking and striking power, just to name a few.
It seems clear that the practice of Okinawan karate 100-150 years ago had a whole range of benefits towards fighting Hojo undo and Chiishi, makiwara striking, kobudo training, and incessant kata greatly strengthened practicioners and gave them substantial gains in striking power. A number of kata sequences aid in taisabaki skill development, useful in fighting. A quite surprising number of movements in kata seem uniquely well designed for all sorts of locks, takedowns, strikes, blocks, etc, and it is highly likely that the Okinawans leveraged the benefits of quite a number of these movements to greatly improve the development of fighting skills of those who trained. It was expected that they would routinely train up to 20 or more hours per week, and with the conditioning that was inherent in this training, these karatemen turned into remarkable physical specimens, quite capable of handling themselves against untrained fighters.
Funakoshi wrote that it was common to take 3 years to learn a kata, before another was taught. Yabu Kentsu taught one must practice a kata 10,000 times to make it one's own. And Funakoshi wrote that a person of significant skill might know 3 or at the most 5 kata. Itosu seems to have implied that the actual applications of kata are not supposed to be taught, but figured out. And that is not uncommon today. One of Oyata's students has written that when a student asked about "bunkai" for a specific move, he might reply "What do you think?"
The practice and transmission of kata changed significantly 100 years ago, when it became common for a system to include many kata. Perhaps the best example is Shito Ryu. Consider the direction sequences associated with 50 kata. Many sequences can be used in a variety of ways. That translates into literally thousands of potential applications. Yet modern Shito Ryu systems don't really focus on extensive bunkai. There is some practiced. But with all the kata, and kumite being a natural component of Japanese systems, there isn't a whole lot of time left in the training day to make even a reasonable dent in the thousands of potential uses of these 50+ kata. There's just no time.
So what do we have today? Many westerners, and hopefully a growing number of Okinawans and Japanese, have a significant desire to translate their practice of kata into self-defense skills. And as more karateka cross train in Judo, Jujitsu, Aikido, Chinese arts (Chi Na e.g.) PMA, and other arts, they see concepts that can map (to a certain degree) to the movements they have practiced in kata.
And as a result, the number of movements in kata that can be used in self-defense applications continues to grow.
But we should all recognize the distinct potential that historically, kata was handed down, perhaps without a whole lot of bunkai.
Of course, many will find this idea, which I fully acknowledge, as being just wild speculation. In a sense this is true. However, I also am reasonably confident that if lots of bunkai had been passed down, that there would be far more of it on youtube. Due to tournaments, and taped demonstrations, the old secret kata are now online. Why hasn't the bunkai. Because, I speculate, in large part because there is nothing there.
Some traditionalists argue that "their" system is different, they have the answers. I argue, "then put up the bunkai for us to judge". They counter, Well, it's still a secret.
Well maybe in another 10 years it won't be.
-Cayuga Karate