Unfortunate attitude to take there, as it is certainly not "mickey mouse" stuff. It is the start of a process of learning to deal with situations on road and develop coping strategies, recognise and process hazards, and make decisions based on information gained whilst riding. I doubt that a lot of parents ride in a manner that is commensurate with the National Standard - certainly I see bad riding on a daily basis.
What concerns me though, is that the instructor didn't allow your daughter to achieve level 2 for something that is not in the National Standard. There is nothing in the National Standard about having both hands on the handlebar when looking behind, merely that the trainee has to be able to maintain a straight line whilst looking behind. Indeed some people have to take a hand off the bars to look behind due to restricted neck/back movement. The instructor in this case was not delivering level 2 training to the National Standard.
Find out from your daughter's school who the training provider is and make a complaint to Steer Davies Gleave (they are the consultants who administrate Bikeability on behalf of the DfT) as the instructor will no doubt be "failing" a lot of other children incorrectly and acting outside the remit of the National Standard. Bikeability schemes are audited on a regular basis, and instructors are observed delivering training. A complaint like this will raise a red flag that SDG will want to look at closely - they have the wherewithall to remove a schemes registration and prevent access to funding (there are cowboy firms, usually one man bands, who are gradually being brought to heel or put out of business out there.) An instructor who is teaching the wrong things is more dangerous than any regular motorist your daughter may come across.
Ok, I checked the documents and here are the instructors comments in full in relation to the objectives failed -
"R does not always cycle in the correct position in the road. Refer to handout with section on 'primary' and 'secondary'.
Do not turn into major road when your view is blocked - vital observation missed.
You can hold a signal in road, but make sure you check behind before you signal and do not look behind with your hand off"
(I assume this means off the bars, but the sentence is written as I've typed it).
And the summary comments -
"R gained her level 1 and achieved several outcomes on level 2, however she requires further practice under adult supervision as she missed vital observations whilst cycling up to and out of a junction. R did not always cycle in the correct position in the road and needs to recap on the primary and secondary position."
So all seems fair enough, if that's what the instructor saw. My daughter says she looked behind and both ways at the junction and saw it was clear to progress, but the instructor obviously didn't feel confident that was the case. Clearly gets a cross in the signalling box for looking behind whilst signalling though.