Interesting discussion. I don't see why you can't get the best of both worlds, if you want - edit out and redo the complete cock-ups, but keep the minor fumbles that don't really sound too bad. And if that is the attitude you adopt in advance at the recording stage, nerves can be largely overcome, I think. However a video fade-out/fade-in is nothing like as easy as an audio one, and I greatly respect Anahata and those others who are prepared to put up high quality live video performances - personally I prefer audio only, partly because it's so much easier for the player, and partly because, for a viewer, spotting the fingering used is not actually very easy to do anyway.
But I also have to support the 'acid test' thing. I'm afraid that it's easy to imagine we're playing an awful lot better than we are, and the simple process of recording one's best efforts and listening to them can be an edifying experience, demonstrating in horrible clarity exactly what one hasn't learnt. Luckily, a real audience will often 'fill in the gaps' for you, and will usually be on your side in creating your own good performance, so it's perhaps not as awful as one may think, but that doesn't take away from one's responsibility as a musician to perform as well as possible in the first place.