1) We would agree if it were worded differently. I think we should word it "shown they are better..." "you will be better..." or "you could be better..." or "or you could have this enviable quality...". I think that there must be something that you could find that they could be good. If you just compare student's writing with his or her previous work, then we take this unethical part of comparing them to other students which creates a totally new conflict.
2) One diagnostic guide does not encompass the varying student abilities and/or teaching styles. Writing and assessment is so subjective. If we regress back to having a pass or fail diagnostic, like blanket pedagogy, we enter the land of standardize testing. Then that would go back to teaching with the guide at the epicenter of our lessons as opposed to being student-centered. In order to diagnose a student's writing, using the developmental perspective, teachers should remember that writing is not formulaic. Some students will innately pick up the patterns for writing, but most students won't.
3) The way to cross the divide is to understand students, to not be a static teacher but remain dynamic, be aware of their individual learning styles and voices, and mid and end semester evaluation, and be more accessible like with student conferences.