Heard it explained best by another instructor in a bar after his student called him "sir"
He said: "At the school, its sir. In the bar, its <first name>"
No reason you can't be mates with your students as far as drinks after a hard day go. There does definitely have to be a distinction between flying and beer o'clock though.
As for the romantic thing, well wouldn't know. But definitely would be giving them to a different instructor to fly with methinks.