Socal, your posts always read sensibly to me and Bose, you are a personal friend, so I hope you won't mind my saying that you are being tough on Alister on one particular point.
There seem to be 3 issues here.
1. the training of students by a JAA FI (but not FAA CFI) who then go solo on an N-reg aircraft
This was the major point being debated, and although both of you have hammered your views, I am afraid I agree with Alister. I think he's right and you're wrong, so a bit less certainty slamming someone might be in order
2. the activity above without an FAA CPL, only a PPL
I think this is the problem. If Alister is the PIC, and someone else is paying for the aircraft hire (irrespective of whether Alister is paid or not) then I think Alister needs a CPL. It's more the "common purpose" legal interpretation of 14 CFR than something actually written in 14 CFR. But the local FSDO is the authority, not a letter some other FSDO wrote at some point in time. Only the FAA's main legal office issues letters binding across all FSDOs.
3. the immigration issue
I know nothing about this, so no comment other than personally I think it's crazy to mess with US immigration and I would not rely on being unpaid as a defence in something that in other respects looks like work.
Alister,
Trying to be neutral, it does sound as if the legality of what you're doing is a potentially fragile construct based on your interpretation of points 2 and 3 above. It is notoriously difficult to get definitive and binding interpretations of this sort of thing. Generally, the competent authorities (FAA, TSA or US Immigration) don't issue exhaustive guidelines, there is always a boundary area in which the discretion of individual officers and offices applies, and if it comes to a conflict, case law is used to resolve it in court. The fact you read the rules and felt you had a reasonable interpretation of them (eg. "I didn't need an FAA CPL or work permit because I wasn't being paid") is not a defence if the case law (or statute law you have missed) is against you. You'd be wise to get a written answer from responsible local agencies. Bose's comment is not unreasonable, that professional pilot recruiting is not going to favour someone who juggled around the intersect of 3 pretty grey zones to convince themselves what they were doing is fine. A lot of professional flying involves the discipline of not convincing yourself something is fine based on your "reasonable interpretation" without the appropriate degree of rigour.
brgds
421C
ps. bose, just to add a qualification to your comment on the 20hrs training for the FAA PPL. This has to be conducted by an FAA CFI only if the training is done in the USA. Outside the USA, a qualified ICAO instructor can act as an authorised instructor for FAA required training and can sign a log book confirming such training was given. However, he can't do any more - eg. sign any of the required endorsements for a student to take a test