Parson,
My understanding is that the change will be that PPL instructors will be able to be paid for instructing. That being the case why do you assume that they will in fact work for nothing. They will have paid for their licenses and ratings and will presumably want to see some return for that investment. After all, they are not trying to build hours to make themselves more interesting to an airline recruiter.
As far as continuity is concerned, part time is really irrelevant. The flying club I am a member of has several part time CPL holders instructing on one or two days a week. They all have regular students who have lessons on the same day each week or each fortnight with the same instructor. It matters not to those students whether the instructor works at the flying club on other days. They have continuity of instruction and would still have if those instructors held PPLs.
At the same flying club there are two instructors working part time who hold restricted BCPLs and who presumably under the EASA scheme will revert to a PPL and FI (unrestricted) but will be able to continue to be paid for instructing. I flew with both of them when I did my initial PPL training in the early 1980s and I would guess that they both have between 7 - 10 thousand hours of instructing experience by now. To suggest that they should only be able to instruct NPPL students but a fATPL holder with 250 hrs total time and an FI(r) should be able to instruct to PPL level is just bizarre. Instructing is about being able to solve students problems with judging landings or steep turns or whatever and with experience of instructing that becomes easier for the instructor and more beneficial for the student. It is irrelevant if the instructor rating is contained in a blue, green or brown book. It also again undermines your point about continuity - how many fATPL holders will give a club that sort of length of service either in instructional hours or years? It makes me laugh every time I talk to an airline F/O who says they did loads of instructing and when you ask how much they reply "500hrs". In the old days when everyone started on a PPL 500 hrs instructing wasn't even enough to get you exemptions from the approved CPL course - even though I used it as a stepping stone to a commercial license I instructed full time on a PPL for 7 years and about 4000 hrs instructing giving continuity to plenty of students along the way and never instructing for nothing.
Finally, whilst for some a PPL is the first step on a career ladder for many it is not. There are still a lot of PPL students are in their forties and fifties by the time they can afford to learn to fly, and many of them will find it easier to relate to a part time instructor who has a career outside of aviation than to a 22 year old potential airline pilot, no matter how dedicated an instructor they might be.
Sorry if all that sounds like a rant, but this topic seems to crop up on a regular basis and having held an instructor rating for over 20 years I would suggest that there are good and bad instructors holding PPLs, BCPLs, CPLs and ATPLs. A bit more theoretical knowledge doesn't make a better instructor in a C152 for a PPL, although I would suggest that if the IMC rating remains maybe significant experience in single crew IFR operations or an IR might be a sensible qualification for teaching it.
(edit - sorry homeguard, we were typing at the same time totally agree with you obviously)