I actually did make it as far as my yellow belt testing. In three months under my instructor--one of the more respected instructors in the area--there was not an ounce of sparring, and this includes all the colored belts. And at the testing, which includes many of the organizations local head honchos, there were red belts testing and they didn't have to spar during the test to get promoted.
This isn't entirely unusual at all.
There are a good number of schools who don't allow their students to do free sparring until they hit near black belt. While it may sound silly, there is a reason to this.
By the time they're advanced students, their fundamental technique is of sufficient quality, that when they go into the ring, they're going to be able to do well anyways. For a while, our school did this, that nobody under brown belt was allowed to free spar, unless they were specifically training for competition. Even though this restriction was in place, by the time they hit brown belt, their sparring was clean, strong, and effective, since their techniques and basics were sufficiently polished enough, that I didn't have to worry about how much control they could exhibit.
For that matter, when we take the ones who were raised under this policy, to the USA-NKF regional qualifier tournaments, they can spar just as well as any of the others out there, and this is against quality competition as well, not some no-name, undisciplined tournament.
By the time they became black belts (usually within a year of becoming brown belt), they could do free sparring as well as any in the nation. They weren't gun shy about sparring, and had levels of physical conditioning that were good enough, that they could take a decent shot to the body, and keep going without developing a sense of fear.
A lot of times, the worst thing for a beginner, or even intermediate, student can experience, is taking a very hard shot to the body, and not being ready to take such a blow. As a result, a lot of times, they can end up fighting in a scared manner, that they're afraid to take the initiative and be the aggressor. A lot of these folks then start using purely defensive methods, and this hinders their development.
There just seems to be a sense of terror surrounding people actually hitting each other. I at least know that the local WTF school has an entire class per week dedicated to sparring.
Again, it's not necessarily a bad idea to hold off on the solid contact until later. This way, you have better control from the people throwing the techniques, and better capacity to absorb a hit from the recipient.
Does it appeal to everyone?
No.
There are a lot of people who want to put on the fist pads and shin guards, and start sparring right away, and may get frustrated when we tell them they have to wait a bit before doing actual free sparring. However, once they see the development of the beginners and early intermediate students when it comes to their techniques, and see how their one step sparring (ippon kumite) has greatly aided their sense of direction, discipline, distancing, focus, power, and balance, they begin to understand that there's a good reason why this method works.
In the end, you retain more students this way, and they end up being able to spar as well as anyone out there. This method simply requires a bit more patience, but produces excellent results.
IMO, due to the ruleset, unless the art was modified for the cage, or unless the TKDist has knowledge of the ground, no, its probably not going to work. I think we've seen proof of the 1 dimensional fighters from the early UFC days. You had 1 style fighters competing to see who was best. Every time, the grappler won. 
