As for shunning the use of GPS during basic nav training (in order to develop map-reading and DR skills), I totally agree.
But when moving beyond PPL, and certainly for those who are hitting CPL training, they should be comfortable making use of all the available resources onboard their aircraft. In fact I would say it is encumbent on them to do so, if they want to call themselves professional pilots. Unfortunately there is this persisting "old school" mentality amongst instructors that the student should have his hand slapped if it goes anywhere near that GPS. I find this way of thinking to be totally out of step with modern aviation, because the technology is firmly in place and it's not going away anytime soon. Yes, there are equipment and user limitations to be aware of, and the instructor should ensure that the student uses the technology in moderation (so as not to become too dependent on it) - but what message does it convey when we have a large number of "professional" pilots out there who don't know how to use the equipment themselves? I fly not only with students, but fellow work colleagues who don't know how to use the NAV mode on their autopilot, or that a HSI is always in the command sense, and heaven forbid we should actually turn the GPS on! In short, the current (and upcoming) generation of instructors are perpetuating this technological ignorance because no-one ever fully explained it to them, so they think their own students should be kept in the dark also.
I recently taught a GPS course to some aviation diploma students, and made the remark that by the end of training they were probably more familiar with how to operate a GPS than 90 per cent of the Instructors responsible for the delivery of their training. Of course, this is not to take away in the slightest from the importance of continuing to promote the art of stick-&-rudder and DR - but it would make for a worthwhile and long-overdue change to see some more instructors out there stop being so anal about modern technology in the cockpit.