However, instead of restoring the mixture to rich ... the instructor purposely left the mixture at idle cut-off and told the student to fly the asymmetric circuit with the propeller windmilling....
Australian ME training is in a worse place than I thought. If this kind of thinking exists in GA (and with a touch and go off the approach as well!), the problem has gone well beyond which lever to pull.
I think it is probably unreasonable to expect CASA to stop this kind of stupidity. Mixture vs. throttle, yes, CASA can make rules to settle the debate from a legislative point of view. But people, surely you can see that many of these accidents were just plain ignorance and stupidity? Can't legislate against those.