The pilot-in-command, who held a commercial pilot certificate, was letting his passenger, a certified flight instructor without a current medical, execute a simulated engine-out approach to a full-stop landing. While trying to stretch the final glide, the passenger let the airspeed get too slow, and the aircraft started descending at an excessive rate. The pilot-in-command did not take any remedial action, and the aircraft impacted the terrain about 40 feet short of the runway, resulting in substantial damage to the airframe.