I usually give lessons by utilizing my midi and studio equipment. Give the students the opportunity to record themselves or practice scales along to midi tunes, record themselves on cassette so they can take it home and impress their friends etc..
I've found that just handing over my guitar synth to em when I'm teaching basic theory tends to hold their interest a lot more than just sitting there with two guitars and a little practice amp...and if they don't learn their lessons, they don't get to play with the cool stuff.