you are correct in saying that i have witnessed breakage at the spline transition on cut splines, however it was because the shaft was not necked down to the spine minor diameter/root diameter after the splines ended. cutting splines without necking down is asking for trouble as it creates a lot of spots for potential crack propagation. necking does not eliminate the possibility, but if the shaft diameter is the same as the spline minor diameter instead of the major diameter then you have reduced the number of potential sites by however many splines you are talking about, 62 in this case as a crack could propagate from the backside/unloaded side of a spline just as easily.
the bottom line is that a splined joint in general is not a great idea, but because of how easy they make everything else its worth it. all you can do is minimize potential problems as much as possible. my point with the cut vs rolled splines is that with the materials and heat treat methods we encounter the most in the 4x4 industry, a "properly" cut spline is not going to be the failure point on the shaft (i.e. you wont "strip" the splines off before the shaft breaks, which seems to be the allegation here).
my 2 cents