On 2003-11-28 21:56:07 -0800, "BTIZ" said:

Please explain and give references other than making a statement.

My reference? I have held a CFI certificate since 1992. I needed an instrument rating then,
and that hasn't changed. I'll agree that the wording of 61.183(c)(2) becomes somewhat
difficult after the words "instrument rating." It could be that what the "or" is referring to is
something like a multiengine rating. It is possible to hold a commercial certificate with a
multiengine rating that is restricted to VFR. In that case, it appears you would not be eligible
for a multiengine instructor rating as you do not have "instrument...privileges...appropriate to
the flight instructor rating sought."

As for the part about students being paying passengers in a commercial operation, I can't give you a reference because there isn't one. It is flight instruction, which is specifically excluded from the passenger-carrying provisions of the regulations as stated in 119.1(e)(1). If it somehow were a passenger-carrying operation, the only place it would fit is part 135, which specifically prohibits passengers from manipulating the flight controls.