From Seminole POH, Section 10 - Safety tips, paragraph (l).Date of issue March 23 1978.
Quote: Experience has shown that the training advantage gained by pulling a mixture control or turning off the fuel to simulate engine failure at low altitude is not worth the risk assumed, therefore it is recommended that instead of using either of these procedures to simulate loss of power at low altitude, the throttle be retarded slowly to idle position.
Fast reduction of power may be harmful to the engine. A power setting of 2000RPM and 11.5 in.Hg MAP is recommended for simulated one engine operation. Unquote.
As far as I am aware there has been no published amendment to that philosophy, therefore it would safe to say that the advice is still valid for 2001. Certainly any litigation would rely heavily on that advice.
Pulling the mixture to simulate engine failure after take off certainly gives a dramatic engine failure but there is no shortage of stories to indicate that students can whack on full wrong rudder in error. To recover power to the engine, the instructor must first close the throttle on the "failed" engine - then place the mixture lever from cut-off to rich - then advance the throttle back to high power. Plus recover flight control from what could be an alarming attitude. Very busy man, the instructor....
Depending on the urgency of the situation, and particularly if the student pulls back the incorrect throttle in error while attempting to identify the "failed" engine, the instructor will be working like a one arm wall paper hangar to restore symmetric power.
Pulling the mixture to simulate engine failure may have have its advantages in terms of surprise factor and desirable engine operation, but as soon as the mixture is cut, the drag is instantaneous and if not immediately corrected by engine restart and setting of zero thrust, a potentially dangerous bleeding off of airspeed can result.
In short, if all students were perfect pilots, then a mixture cut at low level is fine because nothing could go wrong ever.
But unfortunately there is a real world out there and students have been known to over-react and make mistakes.
Instructors who cut the mixture at low level to simulate engine failure are putting lives at risk. I can see the lawyers sitting ready to pounce on the instructor, the supervising CFI and the flying school operator. And quite rightly so.