Your driving instructor is correct.
Section 144 (12) of the HTA allows you to enter on a green (well, no kidding). Once you've pulled in to the intersection, as you know, you just wait for traffic to clear and then turn when safely able. Now, here's where some confusion comes up. Section 145 allows by-laws to be passed prohibiting blocking an intersection:
Blocking intersection - 145.
(1) The council of a municipality may by by-law prohibit a driver or street car operator approaching, at an intersection, a traffic control signal showing a circular green or green arrow indication from entering the intersection unless traffic in front of him or her is moving in a manner that would reasonably lead him or her to believe he or she can clear the intersection before the signal indication changes to a circular red indication. R.S.O. 1990, c. H.8, s. 145 (1).
Idem
(2) A by-law passed under subsection (1) does not apply to a driver or street car operator who enters an intersection for the purpose of turning to the right or left into an intersecting highway and signals his or her intention to make the turn prior to entering the intersection.
BUT... it's all written implying that they expect you to enter the intersection on green if you want to turn right or left, and wait for the way to clear. This helps people move through busy intersections, like you suggested. Section (2) is specifically written to exempt drivers who are turning, so that they can be in the intersection after the light turns red - if they entered on a green. (Within reason, of course.) Your friend's instructor is also right, it is illegal to stay behind the line. It's an offence called "failing to proceed as directed." The only exception would be if there was some safety reason to stay clear of the intersection (e.g. approaching emergency vehicle, red light runner, etc).
Omega_Gin wrote:My parents, who have had their licenses for almost 30 years tell me that you are suppose to wait behind the line and wait for the way to clear. My friend who just finished drivers ed told me his parents told him the same thing
Laws aside, I agree with your personal thoughts, using a common-sense approach. In Toronto, if you insist on staying behind the line, you might be stranded there for several hours "waiting for the way to clear." But, if you want the "real answer": My sister failed her first driving test because she stayed behind the line waiting to turn left. The examiner docked her marks for "impeding traffic" and the offence of "failing to proceed as directed."
Personally, I find it frustrating when people wait behind the line, but many Torontonians have a unique (read: insanely unsafe) way of dealing with this. It's called the "outside swoop": Pass the driver on the right and turn left in front of them. 
* The above is NOT legal advice. By acting on anything I have said, you assume responsibility for any outcome and consequences. *
http://www.OntarioTicket.com OR http://www.OHTA.ca