Oml Fi
Whopity
Of course, you are correct in that the CAA, being the horses mouth, is the final decider although, that said, in these days of JAA and EASA they are sadly not always authoritative.
However, the precedent is set as I previously described. Even operating the FI on a Class 2 might still bear the OML, just the same as the Class 1.
PIELORD
A restriction to fly with a pre-solo student would not prevent you sending students on subsequent solos. The OML presumably is not a restriction on your mental capabilities (sic). Removing the restriction (r) from your rating would be just the same as any other FI(r).
As Whopity has already said your next move is to consult the CAA (medical section) to discover whether your OML will be applied to PPL instructing privileges - who knows.