Yeah but theres a difference between "ok today we are going to do some heavy sparring, don't hold back" and "hey, you come here, followed by a judo toss, mount, and some gnp". First would be an awesome training tool, the latter was just someone punking you in front of all the other students.
Also in my example you quoted, the story I heard was...they were just having a roll (no strikes), then all of a sudden he Ralph just opens up and starts pounding on him. Even if Dave could hang, how do you react in that situation? It would feel weird trying to get into an all out brawl with your instructor. Not just because he's your iunstructor, he's a pro mma fighter, but also the "wtf is going on" moment thats going on in your head.