I also use a kinesthetic teaching method similar to Ray Smith's.
No, I don't wrap my arms around anyone when I teach. I have my student place their thumb on top of the elevator/aileron stick and my thumb and forfinger underneath their thumb. For the most part, my thumb and forefinger is only there for no more than five minutes total throughout their entire training course.

On the very first lesson, I can help them land and only physically correct when absolutely necessary, which is only a second or two, now and then during the landing process. Usually after about 10 minutes of their first time on the sticks, I can back away a few feet and let them have total control without me bothering them as they fly solo. This I could never do with a buddy-cord when I used one, so you see, I have had extensive experience with BOTH world's of RC flight instructing and will never go back to the buddy-box.

But, as they say, to each his own. The only thing that bothers me is that some instructors claims to have tried my method but finds that the buddy-box is more to their liking. If they had tried my method and experienced the same results I have, they would not perfer the buddy-box. Like anything else, kinesthetic teaching takes a bit of practice and usually cannot be learned properly just trying it for a short time. 5 hours total to solo is the average.

In teaching taking off and landing, I have the student work the throttle and steering and if necessary, all I have to do is reach over and hit the throttle to idle if the plane goes where it shouldn't be going on the takeoff run. Once this method is properly learned, teaching is more fun than personal flying, at least it is for me. If I'm not teaching, my personal planes sits on my work bench collecting dust.

Take care,
CCR
http://www.kites.org/rc_instructors