I use "sufficient height to recover by 2500'" as the entry height. Depending on the exercise, this could be 3000' (Basic stalling 1) or 3500' (Wing drops) or 4000' (spinning). As for showing them what happens when they stuff up (eg. c/c fully forwards, relax power forward one inch, full rudder!), well, that's what the extra height is for. I don't want my students getting freaked out by the ground appearing to rush up _at all_, and above 2000'AGL all heights look the same to the 10hr pilot. I would rather concentrate on the correct recovery technique (that's full power, not full forward c/c Bloggs!) and get that instinctive before they come into the circuit.
Have you heard of affective learning? The student does what you do because that's all they know, so if I teach someone at 1000'AGL and they do alright (in their mind), then the gate is open for them to do it again on a solo. That might be the flight where they confuse forward c/c with forward throttle, and in recovering they snatch the c/c right back and snap roll (flick roll in UK) into the ground.
I'd rather have the height than not.
Safe flying
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Confident, cocky, lazy, dead.