One would hope that somebody with a significant instructional background has both significant flying ability, and an excellent understanding of the need to work to rules and procedures.
You would hope so, but that isn't always the case.
Whilst my airline experience is very limited, my significant test flying experience is that ex-instructors generally make very good Test Pilots, because of their combined good communication and teamwork skills, and ability to observe and analyse what's going on.
Yes, test flying is a very small part of the industry. I would suggest that whilst it selects the best candidates with all the skills you state, many come from military backgrounds, and the rest are also the best qualified candidates from their respective backgrounds.
Within the airlines "cadet pilots" have become a very mature component. This is a much expanded concept, it isn't a new one. The cadets of 15 or 20 years ago are now a significant part of the instructors, examiners and management base, of those same companies (and others).