Instructors need to develop a critical eye and reasonable judgment.  Before each exercise, figure out the main points you wish to emphasize.  For example when teaching low angle water entries, emphasize the belly flop and protecting the face with crossed arms and open hands.  Have them evaluate a safer entry method like wading instead.  After those goals are met, have them bend the knees a bit to protect the knee caps.  If someone is having problems with the basics, pick one or two improvements they can concentrate on - not a whole laundry list.  You can then demonstrate, help guide them through the technique, or give them verbal tips - whichever makes the most sense.  Concentrate on constructive pointers.  When many teach the roll, they complain that a student is lifting their head too early.  I find it more helpful to show them how to turn their face downward and look to the back grabloop.  The later method accomplishes the same goal but it gives them a way to avoid lifting their head.  Another common alternative is a sponge in the PFD shoulder and having them touch their nose on the sponge - same result.

Timing is critical, it is important to provide timely feedback.  Our goal as instructors to to avoid having bad habits set in.  If you notice a glaring error like a paddler reaching beyond their paddlers box, point out the safety issue immediately.  This is one bad habit we definitely wish to avoid.

Once it looks like they have a good handle on the new skill, consider playful exercises to cement the skill.  A good example is an obstacle course when they have mastered aggressive and defensive swimming skills.  This will really drive home the usefulness of the new skill in a fun manner.  Although scenarios are not exactly play, they do an excellent job of forcing students to combine numerous skills and work as a team.

I also like using compliments when students get it right.  If not overdone, positive feedback can help boost confidence and the student will often improve in other areas as well.

A video camera can be a great tool for feedback.  This tool is used by many professional sports teams.  When running rapids, we use a wide range of skills and the action is often very quick.  A video enables us to slow things down, replay key moves, and learn why things worked out well or not.  This tool isn't as timely as verbal feedback but can often catch more subtle areas for improvement.  Here is a great article on positive and negative feedback: Feedback Article.