Open communication is the best solution. If one listens with compassion and non-judgmentally, situations are usually not as serious as they first appear.

On another note, I feel a good instructor will have a vision and you can tell if it is a good vision by how many dancers she has in her entourage. A good vision meets the needs of the majority of dancers and causes fun and growth in her group as well as the community at large.

Students who are insecure or egoists will fade away from a solid group. That's OK. They may quit dancing, or form their own group. If they form their own group, they will find, it is not so easy to feed a lot of egos! This is the Universe's way of teaching them about themselves and that's OK too!

It sounds like you handled everything nicely.