Yoda was never meant to fight. He was meant to represent the unknown nature of the force. The spiritual side. This much is obvious from his dialogue and that his stance on the physical side of the force being thoroughly negative in Empire.
George narrowed the idea of what makes a Jedi - by turning them as a group - into a pseudo-spiritual police force with glow stick batons. The OT presented them as a near dead religion that few knew of and even fewer believed in.
I won't go into the absurd idea that an entire culture can be wiped from public consciousness in under twenty years. We still talk about dinosaurs fondly, FFS.
In the OT anyone could be force sensitive - multiple interviews around the time indicated that becoming strong in the force was only a matter of training and time. Rather than there being a blood test. Another simplification that removed the spiritual angle.
Yoda was a powerful being. More or less the living force incarnate. More interested in what Luke felt than rather what he could do. Even when they were training physically it's more to do with him mastering his body than wielding a weapon. The one time he does whip out the saber it's against Yoda's instruction.
The implication is the force is more than just a power up. Not all Jedi should have wielded lightsabers. Why not other weapons? Why not just the force? Why would they have a fucking dress code or a temple in the middle of the republic capital? Especially if they were mostly dried up as the OT suggested.
"The force surrounds us and binds us. Luminous beings are we. Not this crude matter."
In short Yoda represents pretty much everything that's wrong with the prequels.
Old-ish line of discussion, but...
I actually felt that the progression of events in the PT suggests that the writers were
very conscious of this distinction and were setting up the state of the Jedi in the PT as the problem that led to the downfall of the Jedi.
In the time of the PT, the Jedi believe that the Sith have been gone for a thousand years. This allows them to become complacent, which manifests itself in how they've basically become political pawns (even though they maintain a front as the "guardians of peace and justice"). The Sith are able to use this complacency to their advantage and, through Sidious's position, are able to twist their arms so they literally
do become soliders. As soldiers, they are scattered about a vast galaxy-wide theater of war, which allows the puppetmaster to isolate and destroy them.
The problem is that the true purpose of the Jedi and the Force
had been forgotten by the time of the PT. They had become, as you say, a "pseudo-spiritual police force with glow stick batons." That's very distinct from the "spiritual teachers" role assumed by Obi-Wan and Yoda in the OT, and left them open to being both manipulated by outside powers (led into war) and misrepresented by their enemies (framed for treason--remember that the catalyst for that claim was Windu & co.'s move to arrest Palpatine).
edit: Hell, just look at the history of Christianity, which was the template for the Jedi in the first place. Started off as a movement by spiritual teachers away from the idea of retributive justice and toward a society of mercy and forgiveness, then got caught up in enforcing its aims through politics and government and has lost most of its legitimacy since.
one of them is a cop out plot device...the other is a director ruining his original vision.
Eh, the idea that Force sensitivity is passed down through blood was implicit from the very first film.