The teacher can help figure out what the student is interested in and how they should go about studying that.
The student should be interested in this too. If they want to go along with whatever the teacher says, than they end up with whatever the teacher knows.
There are plenty of ways a teacher can hold a student back -- not motivating them enough, not teaching them the right thing at the right time, not covering the material with enough depth, not covering enough area of material. Yes, there's plenty to make you feel guilty and plenty of ways you can critize your own teacher.
I think the teacher needs to show a student how to do thing, like interpretation and fingering, and then gradually pull back that help as the student learns to do these things for themself.
If the student doesn't like the teaching, or feels the teacher is holding them back, the student needs to bring up that idea with the teacher (with tact of course).
If the student wants, they can always find another teacher that won't hold them back.
I don't think praise is bad. Puffing the student's ego up too much can be bad if the student gets the impression their playing is really better than it is. On the other hand, it may not be a good idea to make the student too aware of their level if they realize the amount of work it will take to make progress.
For jeremychilds, if a teacher has a group of students who don't practice and one that does, then it's easy for the teacher to say things like "You're the best student I've ever had." That 'best' student is more enjoyable to work with and is a relief from the pains it takes to teach the others.
Maybe you make praise appears more as a diagnosis -- good, good, good, and now here's something we can improve. That way the student knows they do some things well according to the teacher's standards, but there are still things to work on.
I think there's a difference between praising the real accomplishments and praising the effort the student puts in.
I also think with some students you need to stay positive and be patient with them when they're not practicing.
I'm thinking of kids here in terms of teaching. For adults, they can see bs. I think the praise for them is more like "Yeah, that's it" when they get it right. They don't need a big show in terms of praise. They know when they've got it right and you're acknowledging that is a reward.
A teacher can also praise when they don't know what else to do. You work but don't make progress. You follow the teacher's directions. The teacher doesn't know what to do, so they tell you what a great job you're doing. It protects the teacher in a sense because you will have a more favorable attitude toward them. And maybe a learning plateau occurs and when you get over it, you don't realize the teacher didn't know what to do.
If you consistently praise a student, I think they will realize this after awhile and it will have no effect. They will know whether they work or not they will get some praise and the effect is lessened.
Personally, I find praise nice. It's nice to be recognized and have someone acknowledge your accomplishment. If not for that, I would check that accomplishment off the list and move on the next one without really enjoying it. I don't buy all the priase though because I know there are many reasons for it and some is bs. So, I think whether there are good or bad comments you should just keep working because that's how you will make progress regardless of how you feel or what people think.
As a teacher, I want to remain objective and tell my students what I see that's good and bad. I do realize with some students this may crush them if I focus too much on what they need to improve.
In the lesson, you can praise them immediately -- while playing or just after. Then you can "review" the lesson at the end and remind them they did well on certain things. Then you can tell the parent what good things the student did and what you're working on.
How else can a teacher stunt a student's growth? Are they teaching them all the areas of music -- jazz, improvisation, composition, ear training and theory, a little music history, some listening so the student knows the great performers and great pieces of music, providing lots of performance opportunities.....

That's a lot. I think it can be done at a very basic level, but there's only so much a teacher can do. If the student doesn't like it, then that student is probably smart enough to find the teacher they need.
Oh yes.. is the teacher inspiring the student to reach their full human potential? Possibly, but that's a lot to ask a teacher to do for every student.