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(when I have done Engine Out Procedures of open and flat fields, I have always made sure that there have been buildings, power lines, animals or people nearby.)
Perhaps therein lies the CPs' less than enthusiastic attitude towards the training technique.
On a more serious note though, perhaps the problem lies not so much in any interpretation of regulations but rather that the student had not been sufficiently enjoined not to practice forced landings below 500ft agl. What you might demonstrate as an instructor, with the student, is not necessarily at all what he should attempt solo?