scubaroyster once bubbled...
This instructor didn't forget to teach the finer points, she wanted this instructor to improperly modify weights in a back-inflate BCD so the OW student could sit straight up on the surface. I wanted the student in a jacket to make her more comfortable, but Judy likes to sell the more expensive ladies back-inflat model.
That's an entirely different issue that has little to do with her "stability".
I can understand why a shop owner would expect you to teach the student to dive using the equipment she had just bought. It might make you job easier to stick her in a poodle jacket and run her through the course; however, what's going to happen when the student actually tries diving in her new rig? Its your job to teach them properly. Properly includes diving in the equipment that they've bought. That's also well within agency standards.
Substituting a used poodle jacket for a brand new BC to correct a problem as easy to deal with as surface trim is ridiculous. That's usually an issue of technique and, perhaps, weighting. It has little to do with the equipment.
I'm curious what the "improper modifications" were.
I still believe that the shop owner was not correct to act in the manner that she did. However, based on your post, I'm now completely and utterly unconvinced that she was not the sole source of the problem.