CFI logging requirement

I've got a question regarding CFI's logging instruction time that I can't seem
to find in the FAR's. Basically, what constitutes "instruction" for a CFI of a rated
pilot? Aside from primary training or non-category/class rated pilots, the CFI can
provide simply instruction while flying. Here's an example situation with three
people in a high-performance/complex airplane:
#1 PPSEL w/o high-perf/complex endorsement flies left-seat
#2 PPSEL w/ high-perf/complex rating acting as PIC in right-seat
#3 CFI in back providing instruction to #1 regarding high-perf/complex endorsement.

Although it might seem a bit artificial, there are a number of
*insurance-related* reasons why this would be a good situation (if, for instance, #2
is named, but #1 and #3 are not). If all parties involved are willing to agree to
their responsibility (#2 acting PIC, #3 endorsing without flying right-seat, etc),
this doesn't seem to violate and FAA regulations that I can see. Of course, this all
goes under the category of, "if you don't have a problem, we have no problems... but
if there's a problem, we'll find a problem."

Where are the regulations/guidelines for CFI's acting/logging dual
instruction? I have even recently heard that a new ruling specifies that a CFI
providing instruction does not even require a 2nd-class medical since they are not
being paid as a pilot?

Hopefully I haven't kicked a hornet's nest WRT time logging here...

-Cory

--

************************************************** ***********************
* Cory Papenfuss *
* Electrical Engineering candidate Ph.D. graduate student *
* Virginia Polytechnic Institute and State University *
************************************************** ***********************