Anyway, what I'm trying to say is, I don't know who is going to tell you that you have "mastered" a skill, and should do so before moving on. It isn't going to be the dive shop or any instructors that I have seen. Who would you work for if you kept telling students that they weren't ready to spend more money at the dive shop? Doesn't take too many students to complain about that before the dive shop will find someone willing to tell students to spend more money. Sure, there are those out there, but they are few and far between.
Gotta agree with Bob on this one. Depends on the instructor AND the lds. If a student isn't ready to go to the open water, they won't go, but they are more than welcome to join the next class (yes, they will have to pay for their spot in the pool) if there are spots open, and we'll do our best to have extra staff to help them through.
I've had OW students go through 4 different class pool sessions before they were able to go to their Open Water dives. Likewise I've had students do fine in the pool, but then needed extra dives in the Open Water, which we piggybacked on 2-3 subsequent classes. I've also done more than the required 6 dives for the Advanced Course to get the student to the level I expect when they finish that class.
I also have no problem doing an assessment dive with a student, then tell them they'd get more out of the class if they did some "fun" dives on their own, I just did this with a Master Diver student. You're doing the student a disservice by not doing this.
I think a lot of it is how it's presented to the student. If they understand why they aren't ready for the next class, or able to pass the current class, they'll respect that class more and will have more sense of accomplishment when they do pass. If they do quit and don't pass (I'll teach them til they quit as well), they know why they didn't pass and that it truly is for their own safety.
There is absolutely no pressure from the shop I teach through to pass a student if they aren't performing each skill proficiently. While I do know of instructors who will pass students regardless, most instructors in the area that I know personally would never pass a student who isn't proficient, in any course.