To me full contact means scratching, groping, hair pulling, shoving your thumb into someone's eye sockets, spitting, smacking across the head with a heavy object, growling like a rabid dog and biting, etc. In other words if you feel you're in serious danger in an unavoidable confrontation, everything goes. However if you can, first try to avoid the confrontation like maybe running away. Any serious study of the martial arts requires serious study of the use of weapons. One of the main points about learning weapons is that if attacked with a weapon, you have a better handle on how to defend yourself against that weapon if you understand the strong and weak points about that weapon.
Now if you look at those karate illustrations above, put a knife in the hand and then it changes the picture totally ... thrust to the head or body and a downward slash to the artery on the insides of the thigh. It doesn't take a lot with a bladed weapon to do a lot of damage. Also most karateka who have trained for a long time will not fight as shown in those illustrations ... stances will be so much shorter or probably with just a half turn of the fist. Those moves in kihon or kata are training purposes to help build speed, agility and power. If they still think one fights like that, then they need to find another instructor.
There are many things TMA teaches you (countless blogs on this) and self defense is just one aspect of it.