While China rightly should not accept Japanese public figures honoring recognized war criminals, what private Japanese citizens do on their own time is really of no consequence to relations between the two nations.
You have to keep in mind that relatively few people visit the Yasukuni Shrine in Japan. It is but a footnote in the Japanese public conscience. Most Japanese understandably do not want to think about what their nation did in WW2, but if they were confronted with the issue, most of them would acknowledge their wrongdoing.
The problem with Japan is that their leadership is controlled by a small group of elite but conservative families. Their politicians ascribe to the same "old glories" mentality, where they worship their "samurai spirit". This makes them unwilling to take concrete actions to bridge differences on the WW2 issue with China and Korea.
I don't disagree with much of what you said. Except the ones about most Japanese acknowledge their wrong doings. In fact most Japanese are not even aware of their wrong doings. And those who does, are in denial.
The elites as you put it are the most powerful people in Japan. They are the royal family, politicians and top judges and top businessmen.
You can't absolved the populace of this. Because as the old saying goes, we get the politicians we deserved. After all they did select them out of free choice.
So in summary, I think where we differ is that I think the Japanese people do not think war crimes have been committed, and as such still continues to visit the yasakuni shrines in their millions to honour their war dead. And not acknowledge their war crime atrocities.
Look at Germany, they've made it illegal to have anything to do with the Nazi party. Yet, the Japanese still allows all things to do with imperial Japan.
And until this mentality changes, there will never going to be peace in east Asia.