"When exercising the privileges of a flight instructor certificate if the person is not acting as pilot in command or serving as a required pilot flight crewmember"
I think you have it - the purpose of the wording is presumably to enable a FI with a lost medical to train a pilot who is acting within the privileges of his licence.
As you know if you are flying an N reg aircraft you have no IR priviliges even with an IMC in UK airspace. Therefore outside UK airspace you would not be entitled to operate within class A airspace at all or in any other class other than in VMC.