BEagle, fault analysis is one thing, but knowing what the acceptable standard in all areas of flight is totally different. FI's are not examiners and have to rely on their own standards as to what is acceptable. Yes it is laid down in respect to test standards, but nothing prepares you for flying with all ready qualified pilots who may or may not be totally competent. You have to rely on your own judgement, which is fine if you are experienced, but just like M_J when started instructing, the only experience I had was from a commercial school. I soon found that my standards were not feasible with people who flew on a very limited basis.
FFF, If you get paid/renumerated in any way for a flight then you should hold either BCPL, CPL or an instructor rating (in Heli's).
If the person does not log the flight, then they are not getting any benefit, therefore as long as you are within the statutory minimums of currency, then you don't have to have an FI sitting next to you.
Whirly has it right in my mind when she says that maybe the term 'checkout' is causing the problems. It is not a check, BEagle is quite right when he states that only an FI should conduct this, but having a safety pilot 'just in case.'
Whilst I think that this is highly dangerous, it is not against any rules that I am aware of. The captain/commander of any flight must be obvious, easy with an FI on board as it is always you, but to have two similarily qualified and experienced pilots on board is a recipe for disaster in the event of any emergency.