Well, I've seen my sensei being hit on the elbow with the back side of a tanto

and the effect was quite profound. In fact, for such a light little tap, the effects were nothing short of downright frightening.
Repeated impact right on the nerves causes nerve damage aka lots of pain. Sometimes pain is good, but just causing pain for the sake of pain, in a way that causes life long nerve damage is beyond pointless. And it won't make you learn any faster.
I've also trained in modern JJ, and at the time I quit, I had been practising wrist locks almost exclusively for several months, in a very hard way. As a result, my joints were chronically inflamed, and this lasted until almost half a year after I quit.
In my dojo we train fairly hard (depending on whom you're paired with) and sometimes we apply locks with enough pressure to go down hard (again, depending on whom you're paired with) but most of the time we stop at the point where it hurts, but not so much that there is the risk of damage. That would be pointless. If the flow and technique are right, then causing damage is a matter of pressure and speed.
As to the takamatsu story, he is said to have said that Hatsumi sensei should not harden his fingers by ramming them repeatedly in a bucket with pebbles, lke he (Takamatsu sensei) did when he was young. The reasons were that at the end he had arthritis in his fingers, and he needed a pair of pliers to cut his fingernails which were almost 5 mm thick.
In the olden days, this problem was less important because people didn't live that long, and tough hands mattered in combat. Even Takamatsu sensei recognized that the benefits no longer outweighed the problems.
And in my biography of Fujita Seiko, it is said that he said something similar about Koga ryu, and his reasons for not passing on what he'd learned from his grandfather.