Bad instructors would include but are not limited to those instructors who focus on the advancement of the art and the advancement of their school but not the interest of the students.
This is a rather narrow-minded view of instruction. If the above were the case, then would the founders of the various martial arts systems, such as Funakoshi, Ohtsuka, Miyagi, Mabuni, Chibana, and even more modern ones such as Robert Trias, be considered as bad instructors? For that matter, what about those the likes of Greg Jackson (Gaidojutsu)?
The advancement of the art and school are the primary foci. Otherwise, why bother with having a direction?
The students and what they want to get out of it when they sign up for training in the martial arts is very important. After all, running the school is dependent on students, without any students there would be no school.
Of course. However, it's not about the art itself, but rather how you present it, and how you operate as the administrator of your dojo.
For a student to become a good martial artist they have to find out what works best for them.
This is too broad of a paint brush with which you are painting. A good instructor follows a core of fundamental instruction, and this fundamental instruction is going to be the same for everyone in the dojo. The performance of the said fundamental techniques can be modified if, for example, a student has some debilitating injury that prevents him from following the textbook mechanics.
Once a student has a solid grasp of the fundamental techniques, then he's ready to learn the more advanced material. I would dare say, that the said student is already considered a "good martial artist" at that point, even though he hasn't done much "figuring out for himself."
As this one instructor put it, if he were to teach his students to fight the same way he fights he would only be producing imperfect, unreliable clones of himself. Instead, he teaches his students how to find out how they can fight most effectively. A teacher that is so rigid as to give his students an absolute structure that cannot be deviated from is a bad teacher.
Out of curiosity, are you familiar with how the Japan Karate Association teaches? They are still one of the most prevalent organizations in the world of Karate, and have a proven track record of generating excellent students and instructors.
They follow a very rigid structure when it comes to training, and the bulk of students who go through the JKA's meat grinder (and I affectionately use that term) and earn their black belts are going to be excellent students, despite (or probably because of) following this rigid structure. They will all have the same core of strong fundamental techniques, and can certainly fight effectively.
Structure is important but there is a point where there can be too much structure.
Good fundamentals are good fundamentals. You can never have too much structure when it comes to giving your students a good set of fundamentals.
Martial arts training is not like basic training in the military. A student's opinions and desires are supposed to actually mean something.
Regarding your military basic training comment, you may want to re-think that. In many an excellent martial arts school, the student is expected to follow orders, get a good sense of discipline, and carry out those orders with a LOT of repetition. The learning comes first, and the student's (or trainee's) desires and opinions do not override the advancement of school / military.