Just off the top of my head, the JAR principle is that instructors should have a knowledge/qualification equal to or greater than the standard for which they are instructing.
Why can we not have a Restricted CPL for FIs, limited to instruction only? I guess it would have to be JAR, but I suspect that vested interests in other JAA states wouldn't want it.
Yes, we should have stricter entry criteria and screening. And yes, the FI course might need to be expanded a little, with a formal written exam appropriate to the required skills.
This will increase the expense of the FI qualification itself, but be offset by the reduction in expenses compared to gaining a full CPL.
And finally, FI (A)s should be better paid. As an FI (A) and (H) I am constantly amazed at the differential between (A) and (H) pay per flying hour. If the market will stand it for rotary, which is already v.expensive before you add the FI's whack, why not for fixed wing too?
But if all the FTOs increased their training rates together somebody would complain of cartels etc.
You just can't win!