Should your martial arts instructor have some kind of combat experience? I would say yes. People practice martial arts for many reasons. Outside of self defense, there is fitness, stress relief, competition, culture (perhaps of a specific country), and others. With self defense being the main purpose of martial arts, your instructor should fight experience. What kind of fight experience? Well they should be able to apply there martial art to a non-compliant, resisting opponent in a stressful situation. They don' have grow in the streets or have defended the country in war. But, they should have some kind of experience that you can find out about to determine if they can teach you how to fight more than you already can. They don't have to be a champion fighter, but they should have more than a few fights. I can't say that I've ever learned a lot from somebody who had less experience than I did. Perhaps you can learn some exercises or drills, but when it comes down to what will work in a fight, always go with experience.
World Champion Richard Trammell shares his experiences, views and thoughts on fitness, martial arts and fighting.