Aw, looks like I missed a party! I suppose I'll still throw in my 2 cents, though.
Karate wasn't developed by farmers/peasants to fight samurai--it was developed by the Okinawan nobility, most of whom held positions as bodyguards, palace/temple/garden guards, military leaders, and police.
Okinawans totally had weapons--there is a myth that they were banned, because of a misinterpretation of two old laws, which have since been better translated and understood.
Funakoshi Gichin, despite being widely acknowledged as a "master" later in life, and to this day, was pretty much a nobody on Okinawa--he was sent to the mainland to teach karate because he was a trained teacher in the Japanese education system, spoke Japanese fluently, and understood Japanese culture very well, not because he was the most knowledgeable karate instructor available. That isn't to take away from his knowledge or skill, necessarily, but he was just "average" for karateka of the time, as best we can tell from contemporary accounts. Some of his material came from Azato Anko, while other material came from Itosu Anko (no relation), and while the material from Azato can be reasonably assumed to have practical methods, the material from Itosu could be questionable, for a couple reasons.
Itosu Anko is most certainly responsible for starting the process of watering down karate, which most people associate with his push to incorporate karate into the school system, but there is more to it--he may not have actually even known much practical karate, to begin with! Most people believe that Itosu's teacher was "Bushi" Matsumura Sokon, the head royal bodyguard and martial arts instructor to the royal family, but in truth, he was only one of Itosu's instructors, and he was not the one with which Itosu spent most of his time. Matsumura didn't like Itosu very much, and thought he was too slow (physically), so they had a bit of a falling out. Itosu ended up spending over a decade training with Naha-Te master, Nagahama Peichin, instead, only to find out on Nagahama's deathbed that he had only been teaching Itosu the physical development and conditioning methods of karate, not the fighting methods, and that if he wanted to learn those he would need to go back to Matsumura. Itosu did go back to Matsumura, at that point, but it's hard to say how much practical material he learned from that. We can tell, however, from comparing Itosu-lineage material to other styles, like Motobu Udundi, Matsumura Seito Shorin-Ryu, and KishimotoDi, that the Naha-Te training he did with Nagahama had a significant influence. Add to that his desire to incorporate karate into the physical education program in the Japanese school system, and we can see that his intent with the development of karate was not really its practical application. Of course, the methods are still present in the kata, but I think many of Itosu's students didn't learn how to apply them, or didn't pass them on.
Thankfully, not all of Itosu's students, and not all styles, lost the practical application of the kata movements, and the training methods to go with them. The trouble is that individuals can only remember and pass on so much, so things were still forgotten, here and there. We are lucky to live in an age where technology has made it possible to connect with people all over the world, so bringing that knowledge back together and consolidating it has gotten easier. We know that the over-formalized, simplistic, unrealistic application of "blocks" (the Japanese word actually means "to receive," by the way, not "block") is not the way they were intended to be used, and was really just a basic teaching tool for how those movements can manipulate limbs from different points of contact. They work much better as limb controls, joint locks, strikes, etc., for the most part. There are some instances in which they can be used to simply deflect attacks, but one of the main principles of old-style karate was "kobo ittai," which basically means "simultaneous attack and defense," so using them PURELY to deflect an attack would not meet that criteria, so whatever you are doing should do more than just stop the attack from reaching you--it should also do something offensive.