Our free sparring is supervised and we are constantly reminded that there should little to no contact. However contact happens, especially between higher belts. We also wear shin pads, mitts, groin guards (not me though), and mouth guards. I know first hand about getting hurt during training. I have limped around at work the following day and would much rather have spent it at home in quite meditation. Or mucking about with TFs.
The fear training aspect is indeed much harder to train for. And I must admit we dont really cover much of that. Although as a yellow belt its pretty scary to spar against black belts! 
I wonder if I might get our sensei to incorporate some of your ideas on fear training.
I have done a little board breaking work, with the re-usable boards and tiles. Its not real practical but it really does make you feel good. It makes you aware of certain aspects - are you focusing your power the way you should; are you using your hips to generate that power. I also like the feel of your fist actually hitting something hard. Again, if you're not doing things right, these exercises will let you know - like striking without straight wrist, etc.
Outside of that, its pretty much just a demo thing to impress on lookers and non-martial artists. Still fun though.
Never been attacked by a watermelon though...
Gok -- PM'ed.
TF Figs of 2024:
1) Legacy Magmatron
2) Legacy Gears
3) SS102 RotB Optimus