I think you’re right that teachers confuse students by sounding out the initials and finals. I remember clearly how confused I was when the teacher said “mo” + miao” = “miao”. When you just listen to it, it sounds so weird! Of course, it’s equally weird to tell someone how to pronounce “cat” by saying “see” + “ey” + “tee” = “cat”, but that’s ingrained into people who know how to read and speak English that it doesn’t even occur to people that it is weird (just like Chinese teachers don’t realise that “mo” + “iao” = “miao” sounds weird to most students). I never sound out words this way in Mandarin as it makes very little sense to me.

I think using IPA occasionally can be good, but not for vowel sounds. Vowels are complex as it is and just seeing a weird symbol doesn’t do much for the students. However, it’s great for series like zh/ch/sh, z/c/s and j/q/x where you can really see how the sounds are similar.

In general, a lot problems in the area of teaching Chinese as a second language comes from people using things they learnt at children without thinking about it, or applying the same methods they used in school to teach adult foreigners. This is a good example!

If transparency is the goal, IPA is the only good option!