Then I asked him how he would handle an in-flight electrical fire. He replied, "Well, according to the POH, we'd have to turn off the master switch which would result in our having to make a forced landing." Not quite true.
It's an unfortunate fact that airplane systems often aren't given the attention they deserve during the course of flight training. Nothing good can ever come from this.
The next time you and your student are preflighting the airplane, open the cowling (if possible) and have a look around. Your student should be able to identify the engine's major components such as the magnetos, the carburetor (or fuel management unit), the vacuum pump, the intake manifold, the exhaust manifold, and so on. Point to any of the airplane's several antennas and ask which equipment uses them. Your student should be able to identify the transponder antenna, the VOR antenna, the marker beacon antenna, the glideslope antenna, and so on. If he suggests that some of the antennas are used to help dry clothes when camping out, you definitely want to spend more time with him on this subject.
Can your student tell you about the operation of the constant speed propeller? Ask him why, on most non-aerobatic single-engine airplanes, the propeller will default to the low pitch, high rpm position if oil were to leak out of the crankcase. Ask him why it's called a constant speed propeller in the first place.
If the airplane has an alternator, ask your student if it's possible to start the engine by handpropping if the battery is completely dead on your "typical" general aviation airplane. Then ask him if the battery will charge once the engine starts.
Modern airplane engines have incredible reliability. What we can't take for granted is that every student will learn the important things about the airplane's mechanical and electrical systems. Let's make sure they do.