So please tell me, what should I be looking for in a dressage instructor?
This is what is important to me (from experience with number of trainers till I found trainers I really liked):
1) Trainer should be encouraging. By that I don't mean he/she should say "sure, your horse can go to 3 (4, GP...) level", but that dressage is all about improvement and communication and that any horse and rider can progress and improve. I run into trainers who told me "your horse is useless (cheap, not well conformed, not bred for english, etc.), so you both won't improve, much less show". Run away from such trainers!
2) You have to learn something new and improve every lesson, and the instructions should be clear and trainer willing to spend time to explain and answer all questions (even dumb sometime
- I ask dumb questions all the time!).
3) Trainer is not forcing you to use gimmicks: tie down, speaucial bits, draw reins, etc.
4) You should enjoy the lesson. Unless you are happy you won't progress.
5) Trainer may invite you to watch several lessons of different levels to see if you like the way he/she is teaching.