in Germany the problem is solved by the flight schools receiving specific permission to fly below the legal altitude during required training. This is only allowed during basic training and not during practice after you have your licence. This practice has been used for years with no problem and didn't change after JAR-FCL was employed except that now the school must apply for it, before it was always automatically in it's certification.
Occasionally organisations offer special "safety classes" for licenced pilots in which they want to include these emergency trainings below legal limit (500' rule). The permission for it can also be applied for at the authority and it will usually be granted for this specific course.
The various local authorities used to designate particular areas for this practice, but now they usually don't. Too often the students would guess what excercise was going to be done, just because the instrutor headed toward the practice area... thus, it was no "surprise" any more.
Westy