Is the standard of FI's on the way down?
Personally, I don't think so. There have always been muppets about and there always will be, even if FI's earnt £10k a week.
Instructing has always been an hour building route for prospective jet jockeys, there is no difference now than at any other time in this respect.
What we are losing however, is people who have any experience of the private flying world. Most people from an integrated course with an FI rating know about as much about PPL's as I do about basket weaving. (I'm sure I could understand the principles involved but the actual knowledge escapes me.)
If FI's could be paid properly, then we may see more "career" FI's, but they will still be in the minority as very few people spend the thick end of £50K to end up earning 25K a year, no matter what the job. So most will still end up disappearing when an airline job comes up.
With the current system there is no way to avoid it and I very much doubt any of the licencing bodies have the b*lls to fix this problem properly for the long term future.