I like to make things realistic to a point. There is a line that gets crossed when you may end up making a scenario a real rescue, or injuring a student. I've heard of some rescuees getting up under structure, or putting their head in a back to limit bubbles on the surface. This is overkill IMO and has the potential to injure someone. That said, I take my time and introduce things slowly and make sure people are absolutely comfortable before moving to the final scenario which is the amalgamation of almost all skills introduced in the course. It works for me from a risk mitigation standpoint, and my students feel pushed without making it dangerous.
I had a young couple do the PADI rescue course with me this summer, in preparation for a live aboard in Australia. They put their skills to good use the first dive. A lady bolted from depth, panicked on the surface until passing out, then had to be towed back and full CPR with AED and O2. She lived. My students were involved in the entire rescue. I'm confident I taught the course well, without making it realistic to the point it becomes dangerous.