I became an AFI earlier in the year and can tell you that you do need to pass the Commercial exams and the instructor course before being paid for instructing and you do need to pass the Class 1 medical. The medical is currently done initially at Gatwick and costs approx £450 if I remember correctly!! The requirements may change in the future with the changes in JAR regs but thats the way things stand at the minute. The new NPPL may change a lot of the requirements, who knows?
Hope this is some help as I instruct on helicopters and not fixed wing.