I wont break out the champagne yet, but the word of the day is "progress".

Ahead of time, I emailed my student a list of things I wanted to do during the flight, it included stalls, steep turns, short/soft field takeoff and landing, etc. I told him to review all the maneuvers ahead of time, either chair flying or with MFSX. When he arrived (late, but forgiven) I went through the list with him and tried to put his unsatisfactory checkride in the past. I told him that we were simply going up in the plane for a flight and that these are the things I wanted him to do. I said "This isn't a checkride, I can't/wont kick you out of the school. Let's just go flying as if you rented the plane today and you were going to show me (your passenger) these maneuvers". I said that I wouldn't be much more than a passenger and enforced the idea that all the decisions and responsibilities were his. (By the way, if you fold your arms in a 172, your hand is right next to the window latch. He handled that well on the climbout.)

Here we go

The Good:
Preflight inspection
He noticed the pax shoulder harness wasn't latched and instructed me on how to use it as well as the doors
Good radio communication
Excellent short field takeoff - stable airspeed, good centerline tracking
Slow flight - excellent airspeed and power control, altitude was within PTS
Simulated emergency engine failure procedures
Excellent lost procedures with a failed gps/comm 1
Good normal landing

The Bad:
He never mentioned the weather. There was precipitation over 50% of the practice area
Using the breaks to steer on the ground instead of rudder pedals
Terrible rudder coordination throughout the flight
No Cruise checklist performed
Slow flight - not coordinated, heading deviated +20 degrees, trying to correct heading with rudder only, the ball was almost to the limit
No Pre-landing checklist
No Shutdown checklist

The Ugly:
No clearing turns
No checklists
No rudder control

We debriefed and went over the whole flight with a fine-toothed comb. I praised him for the things he did well and really drove home the rudder problems and the checklists.
The original problem - not being able to make decisions seemed to subside somewhat when I told him that all the responsibility was on him. Other than missing the weather, he did well with the decisions. He asked less questions. The ones he did ask, I never answered, or I would respond in a way that lead him nowhere. I really needed him to decide what to do and I think he walked away with more confidence.

2 more ground lessons and another flight and I think I'll send him out again.