Wow, you guys are very knowledgable, and some of what your talking about I've not heard of before. But, I tend to think of WC/WT more simply.
Chi Sau for me begins as soon as you make contact of any sort with an opponent, whether in sparring or self defense.
It may be practiced at first as set motions or drill, but that's just to teach you where to start with. To give a foundation of movements to the practitioner. From there you expound upon that. Improvise, and feel the energy and intention coming from your partner and learn to flow with it instead of fight it.
Sensitivity is a side effect of this type of drilling. It's the end product of a long time learning in a 'safe' environment what works and what won't work when given certian force or energy direction, and how to re-direct that energy (i.e. attack) away from you.
Spontenaety is the key with chi sau, and with sparring or fighting. Without the ability to adapt and improvize at a moments notice a martial artist's training is almost totally useless in combat.
To me chi sau is the heart and guts of combat. When you make that first 'touch' with the opponent and you 'stick' to them like glue overrunning his/her space and taking their force from them and responding to their intention immediately.
ex. a sparring partner feints and short jabbs at me to 'feel me out' before attacking. I catch a jab with a tan sau, even when they pull the arm back, I stick to them arm to arm following their movement to take their space. The gap is bridged, your in chi sau, breathing, living, spontaneous chi sau becomes the heart of your defense and attack, it IS combat.
When an opponent pulls back, your arms act like magnets, hubbie teaches this way of thinking of chi sau. Magnets. Both attracting and repulsing eachother with force. The opponent is too strong their force pushes, I give, but still stick (like a magnet) to them following them, re-directing their force where I need it to be to respond. They break contact, I'm open and availiable to strike them.
The drills at the beginning teach the practitioner "options" in given positions that at first seem like their's no way through the opponent's guard. Too often it seems people don't see past that, and only see chi sau as a drill.
Sure, it's a drill, it's a combat drill. And when your in combat, it IS combat. You'll fight like you do chi sau everytime in sparring or self-defense. It is "the way of intercepting fist".