There's a captain in our company who's theory is that a relaxed cockpit leads to more input (which may be valuable, may be rubbish, but is input nonetheless). However this never undermines the fact that he's the boss, and the final decision and, importantly, responsability, lies with him. Moreover, in the above "real life" scenario, I suspect that the FO would have found himself spoken to much earlier, and quite right too.
I enjoy most of all flying with this particular chap, have learned oceans of useful stuff from him ever day, don't feel I cannot suggest anything (although if it's daft he'll tell me with a grin) and frankly I think I perform better when flying with him. I've done some stupid things, and been informed in no uncertain terms, but back on the ground I've learned why.
The atmosphere is less stiff and so is the flying because of it. However he's so good at what he does I think he has more in reserve than some and can handle a daft inexperienced FO's flying to a greater degree. The most frustrating thing about flying with him is wondering why it won't do that for me.
Neither of us are spring chickens, so I am inclined to agree with PilotPete about the "younger masses" to which he refers.
Interestingly, in this debate the real life scenario stems from the FO's rudeness to the captain, rather than the other way around. Is this always the case?