Just a quick Caveat on this, if you don't hold at least a JAA CPL you cannot get paid for the instruction, if you want get paid you need to go outside the UK FIR otherwise it is construed as aerial work and you can get prosecuted for this. Also you cannot instruct with a FAA only IR in controlled airspace which makes it difficult to do the IR x/country. Don’t take the attitude that “he’s a mate we’ll do this 'sub rosa'" – these arrangements have a habit of going pear-shaped as Dennis Kenyon will tell you and you could find yourself in court and being seriously out of pocket.
One needs to be an FAA CFII to instruct for the IR.
DK got done because (according to info fairly widely posted) he fell out with his student, the student shopped him to the CAA, and then DK admitted the alleged offence. I am not condoning illegal acts but this combination of circumstances is very rare. Payment for ground school is perfectly legitimate and it would be astonishing if ground school was not provided, at any level of training.
I was wrong on the stuff I wrote about the TSA website carrying only flying schools. It turns out that individual FAA instructors, based anywhere, can (and apparently are supposed to) register with the TSA.
However, the practical situation is that nobody checks whether some logbook entry from ages ago was done in a TSA compliant situation. Also any flight which can be claimed to be towards an FAA CPL (which is definitely TSA exempt) should be safe because anybody (especially somebody holding an FAA PPL already) is entitled to be training towards the FAA CPL.