When instructing I enjoyed working with primary students more than those working on advanced ratings. I was also scared by commercial and instrument students to a much higher degree than I ever was by a private student. Maybe it had to do with my attention, but I think much of it had to do with bad habits and things you simply can't anticipate that advanced students have picked up along the way.
What is the most fun? Seeing a student suddenly grasp something they have been working on. When all the pieces come together they are excited, and you are satisfied because you know you're doing a good job. The least fun? Sitting in the pattern for hours on end with somebody that is either not putting forth the effort to study on their own, or doesn't care.
Every type of instruction you do will sharpen your skills. Primary students aid in the fundamentals to some degree, but I think they heighten your ability to mutli task more than anything. Instrument students obviously add to this, but they also give you some "real world" experience. I logged quite a bit of actual last spring and it really helped me feel ready to move on to a regional. Commercial students help because you're going to get a little yank and bank out of your system and by that point the student's skills are close to yours so you need to be sharp.
I've had students screw up on solos, solo cross countries as well. In the couple cases where this occured they were honest and upfront with me. This showed that they were learning and this experience, while worthy of a gut check, would make them better pilots. The main rule I had when signing somebody off was that I wouldn't do it until I was confident that they would be safe. Even in the cases where my students "screwed up" they were safe and took what I would consider acceptable actions. That in my mind is more important than doing everything perfectly every time.
Simply put, if I could find an instructing job that payed better and meant fewer hours at work I would still be doing it.