I don't take my students for rides until the afternoon
Why not? That usually means they have about half of their on-track sessions under the belt. This has usually meant I have had 2 sessions to observe them and work with the, understand their ability, their car and their faults. This allows me to tailor my demo ride to show them the specific things I want them to work on. If possible, run them in a run group only slightly above their run group but if the schedule (or group) does not allow that, run with them in the instructor group. For example, if they are Novice and Intermediate doesn't work out in the schedule, don't take them out in Advanced, take them out with Instructors. I have my reasons for this rule but some organizations make this rule moot by mixing advanced and instructors. And sometimes even the other instructors are still the problem. See the last rule in this post below for more.
4 wheels off w/ a student in car is the cardinal sin*
I have ONE exception to this, see below. This rule has been imparted on me by other instructors, but I have one personal exception to this rule. Students need to see us as perfect when we take them out for a demo ride so they will listen to us. The only person exception to this (That doesn't come into play for me yet) is if you are teaching a very advanced student and advanced technique that has a possibility for failure, 4 wheels off might happen. But in those cases, a crash is the cardinal sin and the possibility for failure should be discussed before hand, not a surprise. Equipment failures that weren't from your own stupidity are also acceptable, but if you lose a wheel from loose lug nuts...well...your credibility with that student just got shot to hell.
With your student in the car, drive how you want them to drive
They will mimic your actions...or at least try to. So be sure not to do anything that if they attempt to mimic you and screw up will place you in a tire wall or worse. Depending on the student it may be possible to drive a bit harder (There are students out there that actually appreciate the difference in experience) but keep in mind the previous rule. You still won't be driving flat-out.
Even if your student isn't in the car, they (or other students) may be watching
Keep this in mind when you make passes, when you interact with other drivers on track. Even in an open-passing session, there might be other students on track with instructors, or students spectating. Do you really want them to think dive bombing three cars into the bitch on VIR Grand is a good idea when you have to get back in the car with them? DEs aren't race schools or test/tune sessions. Sure, advanced drivers and instructors can make use of the events for some practice, but don't be driving in full-out race mode especially in traffic. There are street cars out there. There are passengers in some cars. Behave.