"With respect to the ANO ammendment, surely having an instructor sitting next to said student, but not actually doing anything other than watching like a hawk (and having hands at the ready) would satisfy the requirements?"
yes, this would satisfy the requirements, but this means the instructor does not get to eat his lunch/de-brief the last student/do the paperwork/etc while the next student is starting up
it's will be pain having to sit next to a competent student with 40+ hours while he starts up, just to satisfy a legal requirement