Max,
There is a huge difference between the average commercial pilot and the average private pilot - about 30,000 feet, 300 kts, several thousand hours to name but a few. More over of course you student spent most her time struggling with the nav - she was only learning and the lookout is your job as the instructor.
The GPS is a great tool. I don't think anyone is disputing that providing it is used properly. I have seen how easy it is for two commercial pilots to get suckered into a black box in a cockpit. The private pilot will be equally or even more susceptable to that.
The problem with VFR nav is that a) it is poorly taught (instructors think the student will get a GPS when they qualify), b) it takes practice, c) it takes planning and d) people insist on those horrible half mil charts. It is not for the idle or the impatient.
Similarly GPS is a) not taught, b) takes practice to use c) takes planning on the ground and d) uses those horrible Jeppesen charts. Not the solution for the idle and impatient.
There are parts of the world where GPS is more or less essential - where there are few ground features. There are parts of the world, like all the UK and I guess much of Europe where there are sufficient visual references for VFR nav.
Should private flying stop if GPS is switched off? Should we stay on the ground when the military are playing at jamming? Was Chuck exercising bad airmanship by flying in the days before GPS? OF course not. GPS is not a prerequisite for flight. It is an excuse for not teaching for nav properly.
If you can VFR nav properly there is no need for a GPS. If the viz is poor, don't go - you are of course doing it for fun. Where is the fun in groping around in poor viz (with or without GPS) at £x00/hr?