A few misconceptions in ModernDinosaur's post require clarification.
There is no point looking in JAR-FCL for answers on non-JAA licences. JAR-FCL 1.005(a)(2) states, quite clearly "Whenever licences, ratings, authorisations, approvals or certificates are mentioned in JAR–FCL, these are meant to be licences, ratings, authorisations, approvals or certificates issued in accordance with JAR–FCL. In all other cases these documents are specified as e.g. ICAO or national licences." Thus, there is no lack of clarity - the only source of requirements relating to the NPPL is the ANO.
In regard to the validity of JAA licences, JAR-FCL 1.025(b)(1) states "The validity of the licence is determined by the validity of the ratings contained therein and the medical certificate" and so there is no question that a licence that does not include a valid type or class rating or does not include a valid medical certificate, is itself not valid. However, the privileges of a CRI make no mention of 'valid' in relation to the licence held and the CAA cannot, by their own admission, set requirements more stringent than those in JAR-FCL 1. Consequently, there is nothing to prevent a CRI giving instruction to the holder of an invalid licence.
There is less clarity regarding the situation when the licence becomes due for re-issue. JAR-FCL 1.025(c) states "The licence will be issued for a maximum period of 5 years."It could be inferred that, at the end of the 5 year period the licence cannot be re-issued unless it is first withdrawn, this happening automatically at the end of the 5 year period. Thus, if a pilot neglects to obtain a re-issue, it may be said that he no longer 'holds' the licence.
The CAA's position on aerobatic instruction is a nonsense. In law, any pilot, whether holding an instructor rating or not, may give instruction in aerobatics as it is not instruction leading to the issue of a licence or rating - such instruction is a privilege of the licence, not of the FI rating. Consequently, the 'No aerobatics' restriction attached to newly issued FI ratings is entirely worthless as the individual can, quite legally, give such instruction whilst choosing not to exercise the privileges of his FI rating and there is absolutely nothing the CAA can do about it. In fact, the CAA could be said to be acting illegally in seeking to remove a privilege previously held.
Applied instrument flying and night flying are not referred to in the privileges of the CRI because those privileges are restricted to instruction for a class or type rating and not for an instrument rating or night qualification. No instrument flying or night flying is included in the syllabus for the class or type rating - if instruction is required for revalidation/renewal of the instrument rating as well as the type rating, it may not be given by a CRI