My 2 cents worth.
Many instructors feel guilty about flying the aircraft when their students are paying for the lesson, however, in my opinion, this is flawed thinking. A good instructor will regularly demonstrate the correct way to perform manoeuvres (hopefully), even after the student has received training in the specific manoeuvre itself. Remember, a students primary role model during his training is his instructor and by the instructor regularly demonstrating specific flight manoeuvres, it gives the student a greater understanding of what the instructor is trying to teach. On that basis alone, an instructor should be able to maintain a high level of flying skill purely in his demonstrations.
Another important benefit of the student watching the instructor fly is the chance for the student to develop high levels of flight discipline by seeing the instructor exercise same. Having said that a slack instructor will almost always produce a slack student so please for your students sake try and be as disciplined as you can. If a student sees you fly through cloud then he will think this is acceptable and probably develop the same attitude to this (monkey see - monkey do etc).
A last comment that's maybe not relevant to this thread but I'll say it anyway is that I see many instructors tell their students what to do in their flying lessons but not many teach their students - there is a huge difference between telling and teaching and that largely comes from experience, teaching ability and attitude.
Regards.
VH-MLE