What would I do?
If I was the instructor with revalidation privileges, the legal requirements are met, but the pilot has significant deficiences in his flying?
Sign the forms, and annotate the logbook with a statement along the lines of "flying standards poor, remedial instruction essential for safety" or words to that effect.
That seems to cover both the law and my conscience.
But, for all we know, that was the student's first ever tailwheel lesson and the groundloop was basically down to the instructor's failure to cover and take over control quickly enough - and he was man enough to admit it.
G