He Was One Mile Off West Field Boundary At 600ft. He Did Land Immediately  

You may or may not understand that the engine could have (likely) quit before the fire lights went off (if they ever went off).  Sometimes by 10-20 seconds.  (The FAA requirement is something like 1 min) 

If the fire light came on first, he had to diagnose this for a few seconds, establish OEI flight because he's in high power climb, and then press the button.  Then WAIT for the longest 10-20 seconds of your life because the engine doesn't just shut down right away.  

And then, wait some more.  Because the fire sensors take a few seconds, sometimes as long as 10-15 additional seconds to reset if the fire suppression system worked.

Either way, you're somewhere between 30-45 seconds minumum before you have reached the land immeadiately portion of the checklist.  That's pushing a mile of ground coverage right now and you don't know what portion of the emergecy he turned back to the airport for.

I'll give you the benefit of the doubt and say the fire light came on before the engine quit and he started the checklist immediately and he turned immediately.  He's now halfway back to the airport, only 1/2 mile out, at 500ft, assuming no delays and no complications diagnosing the problem, before the checklist says land immediately.  You inexperienced armchair quarterbacks a crucifying him for not doing what? Going straight down?  He probably could have auto'd to the airport by the time his checklist said he couldn't put the fire out and land immediately.  

I feel sorry for your students.

One of the few ways this comes back in your arguments favor is if he got the fire light immediately, had a fire supression system, but chose not to push the button because he did not want to return and land at the airport OEI.  But you don't have that information so you can't judge on that at this time.

Lets not forget as many other are saying.  Theres a realistic chance he didn't get a fire indication and didn't know there was a fire.