It is possible that, with the rules, Higaonna Morio wouldn't have fared as well - we'll never know. He was well out of his prime when UFC started anyway.
However the stand-up/striking artists that I saw fighting in those early days were not in Higaonna sensei's class.
I don't know of any other martial artist who can generate quite the same "hydrostatic shock" as Higaonna, combined with his hand conditioning. His punches and strikes were (and still are) the pinnacle of "bare knuckle" fighting as opposed to gloved punches (which require a different approach). Still there are others who are comparable in the traditional karate schools.
The standup fighters I remember had little of this ability in bare knuckle fighting and little of the conditioning. Moreover they had all grooved very bad sports karate/tkd/kickboxing habits that the grapplers both expected and exploited (clinches etc. were their God-send, while most of the stand-up fighters fell for the "dive to the legs" takedown time and time again.)
I'm not a student of Higaonna's btw - its just that karateka of his calibre were not, in my view, represented at UFC. I'd have put my money on Higaonna and several others any day (even more so if it were truly "no rules"...) Have you ever seen Higaonna demonstrating his "hand tearing" technique?
You're entitled to your view on this hypothetical as am I - but I wouldn't be quite so quick to dismiss people of Higaonna's fighting method or calibre. And his grappling is actually outstanding - albeit not as protracted in tactics.