While practicing a simulated engine-out landing, the private pilot approached the runway at a high rate of descent. The pilot initiated the landing flare too high and allowed the airspeed to decay. The certified flight instructor (CFI) directed him to make a go-around. During the go-around procedure, the private pilot raised the gear and flaps, and commanded a 15-20 degree left bank at which time the CFI took control of the airplane. The private pilot had inadvertently selected flaps 0 degrees and when the flaps fully retracted, the airplane entered an aerodynamic stall and touched down hard. The airplane departed the left side of the runway and came to a stop. Substantial damage was sustained to the fuselage and left wing.