A new student came to me the other day and asked the question why GM Kim didn't allow students to train at full speed making full contact.  I explained that until they could show control no instructor is going to allow you stand there and blast away or allow someone to blast away on them.  He went on to explain that in his opinion if you weren't training to fight at full speed all the time that when the time came you won't be able to do it.

My instructors have always told me that safety is first and foremost.  Coach Ruiz explained it in class that professional fighters do not train full speed full force because if they get injured and can't fight they don't get paid.  

So I have put this out there looking for how your classes train.  Are you standing there just blasting away at folks and eventually they'll learn to keep their hands up or to get out of the way...train the way that you fight  OR is it in a much more controled and monitored environment?

we do both.  we do need to learn how to take a beating.  but we make sure we are well protected so that we don't injure ourselves.  back when protectors became mandatory for the first time (but while some of them still didn't wear), all the good fighters were actually the first one to put on protectors - they didn't want to get injured so that they couldn't beat on rest of the people.  
we put on shin guard, cup, mouth guard, helmet, and 16 oz boxing gloves.  for kicks, we kick lightly, but punches go all out - so far, no knock outs during practices . 
bruises and minor injuries are unavoidable, but when those injuries happen, we make sure to take some time off to speed up the healing process.   

Our sparring in class is monitored pretty well and is easy to do as we've got no students that are too aggro.

I generally pick the fighting partners on the following basis-

Two students evenly matched, I make sure everyone is watching and may do a fight debrief for a minute after so the lessons stick to the fighters and the other students. Without having to say too much they generally go at about 80%

One experianced belt against one inexperianced belt, the challange for the experianced belt is to learn control and encourage to other student to engage in the fight (they're briefed prior to the fight), the challange for the inexperianced fighter is to try and get a couple to connect.

We spar regularly and train for sparring when we can sp sparring is routine and no one gets an attack of the nerves. 

If we got a problem student I wouldnt risk the health of my other students, not sure what I'd do, depends on the circustances.

Incidentaly I think the most dangerous student we regularly encounter is the adult male white belt first time on the mat. They're like a tightly coiled spring ready to explode. I usually always spar them first up but have a good chat to them first about how what we'll be doing on the mats.

I then double pad my shins, hope for the best and try and get my foot back out of the way as they nearly always try to grab it by habit at least once.