Packrat12 - we are probably not going to find any common ground here... But I like a challenge.

.. Safe diving, Hey we do have common ground here
"you would have handled a dive training situation - to which you did not a witness - in a superior manner by explaining the PADI Standards as a "recommendations." - Actually I used how you specifically stated that these are the PADI LIMITATIONS as if they are the rules, which they are not. It would be a perfect time to explain your reasoning and recommendations and not imply that they are the 'rules' used by PADI. It is also a perfect time to properly define the 'rules' as defined by PADI for the non training part of the certification. As for my rant, it is very common to see many instructors mis-represent or patently give false information about what the PADI rules and recommendations are, especially when interchanging the training requirements with actual rules and recommendation for certified divers. Then I believe you said something like 'why would you exceed training limitations'. Well we do that in many dive levels from OW, AOW and even technical. Experience sets this, not the basic training limitations. By the way, we set these on solo flight students also, wind, cloud height, visibility, and cross wind component during their learning process. These are lower (more restrictive) than FAR but we use them to limit risk. We also require the student to know and understand the FAR limits. Once certified, they can either go to the limits (Often stupid) or gain experience and continue to raise them as able.
As for grandpa, I was not there and cannot comment on his apparent skill from being there, nor that of his child. I can understand and agree with your issue with compliance as an instructor. For a CFI, even being in the back of an airplane presents risks to their certifications when they are not instructing. That said, if you have ever read any of my comments on the age discussions, you will find that I fully accept the words My Insurance, My Company do/do not allow what ever. It is when it is quoted as a PADI certification requirement that I will state things such as be exact on the rules and then state what are recommendations.
"In fact any law - including the FAR's - may be considered recommendary in nature - until consequences are applied" - Not so. I/anyone can die even when following rules/regulations and recommendations so there is no guarantee that following them or breaking them will cause consequences. Yes they are set based on many principals including safety, liability and other reasons. If I break a FAR, it is possible that I may NEVER fly again. My licenses may be revoked and fines levied. In the diving world there are no fines, no revocation, just recommendations. Training recommendations are just that, for training. They limit liability on everyone involved and often are used specifically to protect the student from the instructor. They are also a good starting point for a newly minted 'what ever level' diver to use as personal limitations. Once experience is gained, they are not necessarily limiting any longer. Other recommendations such as Recreational limits help set expectations and are based on sound reasons and should be understood by all involved.
I can also say at 13, my child was diving to 130' safely (yes I do use the Recreational limitations). Her skill set is matched with any diver planning dives at the high end of the Rec level. Her ability was honed by many dives over many seasons, getting progressively more complex and challenging. At this point, I regard her at the same level as my wife (both Rescue) with similar attributes. There would be no reason for me to follow the 'training limitations' at her level of skill and experience. Common sense and overall ability is what is her limiting factor now.
Lastly, "And I wish you luck with that, because the consequences of a mistake can be significant." - I actually am very personally aware of this. I have lost over 10+ friends/known people to flying with deaths involved totaling nearly 30. I also have lost 2 friends to diving. I take diving very seriously but do take expectation to mis-information.