I think when he says that he'd say a line/verse Rakim wrote, is just him acknowledging that the R is one of the dopest ever. It's hypothetical, and it's KRS who himself believes that it's dope, so I doubt he'd ever really let that happen.
On ghostwriting, I doubt that everyone has written 100% of their stuff. It's damn near impossible. Especially in groups. You're always gonna have a line thrown at you from someone else. Then you have tracks that let's say you wrote it but need another voice to make it work - I think that's acceptable. That's where you get your Geto Boyz stuff, or take a track like The Watch (Ghost/Rae)...I would believe that Ghost wrote the entire thing, and Rae just spit those few lines for contrast. Or "finish this bar, but use mine first." That doesn't diminish anything. Then you have the quotes from previous artist. They used to quote them, but that stopped. HELL, about 25% of Jay post '98 is Biggie lines. Black Thought did a G-Rap & Kane verse on a track. That doesn't affect his status at all. I don't see a credible lyricist or MC spitting an ENTIRE SONG penned by someone else, unless it's someone close that died.
Ghostwriting has always existed in hip-hop and never gonna change. Of course it's acceptable since it one of the traits of music. However, I've said before that hip-hop artists don't get enough credit as writers. My mans said that it's because there's too many of them. There are only like 10 R&B writers.