The instructor involved sounds like one of those nit picking idiots we all encounter from time to time. What really matters is how the manoeuvre is flown and how controlled flight is restored without exceeding limitations.
Whether the flight director is ignored or switched off is really secondary and at best a discussion item. If it happened for real I suspect it would be at the bottom of the list of priorities.
I'm a TRE and would not award a fail simply because somebody chose to turn the flight director off.