You've asked what people would have done differently, with the caveat that they consider walking the line between ideal behaviour and making a living in an imperfect world.
My thoughts:
1- Upon hearing about the negative entry, you should have added to or redone your briefing about the dive site. e.g. "Your instructor has just informed me that we are going to do a negative entry. This is unusual and unnecessary and carries some additional risk at our site. Who can tell me some of the additional risks they will be watching out for?" Given satisfactory answers, you might leave it there. With unsatisfactory answers, you could use the opportunity to provide some training, e.g. "Each person should take extra care to ensure their buddy is not overweighted. Make sure they know their correct weight and have done a dive recently in their current gear configuration, because in a negative entry situation you could be in trouble by the time you're noticing the problem". And so on. As the DM I think it is your right to give the dive group a briefing at whatever level of detail you think is required for them to dive safely with or without you. You don't have to insult the other instructor to do this either, because you can set it up as a test of the student's own knowledge, without pointing out to them that their instructor should have taught them these answers - nonetheless, an alert class will realize they are insufficiently trained.
2- When the buddy asked "Hey what happend to -----?" I frankly would have blamed him first, and then his instructor. Words like "As his buddy, you should know where he is at all times or abort your own dive to get help searching for him. YOU are responsible for your buddy and he could have died while you dove wondering what he was up to but doing nothing to fix it. Your dive buddy's life is your responsibility and your dive plan should not include diving without him. Surely your instructor agrees with me and has taught you that?"
3- I would have held a debrief at the end of the dive. I would have said something like "One of us could have easily died tonight, in a near panic situation. Let's review what happened and think about what we could do to avoid this next time." Starting with the diver in distress and working your way through the others on the boat in order from nearest to the distressed diver to furthest away, I would get a summary of the start of the dive from their perspective and what they could have done differently to save the distressed diver. As the last person to descend, you should have found the situation under control before you got there, a fact I would have stressed to all the divers. And finally, at this point, you have your chance to roast the instructor - as the next most qualified person in the water after you, he should either own up to his mistakes (including planning a negative entry for students who weren't prepared for it) or be prepared to hear whatever you have to say about what constitutes an appropriate skill level for taking a class in with negative entry and why it was pointless and risky to do so, and triggered an emergency situation needlessly.
I think my main thought is that though I agree with you that the instructor is responsible, and ultimately that had to be said, it didn't need to be said first. There were other guilty parties who also should have been shown their part in the drama, as well as the opportunity to think how they could have done better and rethink their choice of instructor.
Osric
