Yeah. This is a problem. At one school I teach at we have an issue about EFATO - we must teach them but doing so with a recovery height of 500-600' is unrealistic. But thats the situation we are faced with as there are a few houses on the take-off path. We have been warned that the CAA may take action if a complaint is made.
One interesting thing is when I did aerobatics at a grass strip in the UK every flight finished with a PFL from the overhead -> deck. This was great - because you *HAD* to get in...AND you were allowed ALL the way to the ground. So I can really appreciate the value and benefit of getting the student down low.
As I say to students on PFLs/precautionary - 'I will take you when to go around, as far as you are concerned we *are* landing for real.'. This at least seems to get them to follow through rather than hope that I always call go-around at 500'agl. (yeah I know...500' rule 5...but one or two clubs I fly at also lay down rules that all recovers will be at 500'agl...)
However, the other catch-u here is that the airstrip that you go into MUST be licensed for traning to take place, and there are relatively few grass strips in the UK that are...shame really because I think there could be great benefit in using these 'field like' runways...