The certificated flight instructor (CFI) and student pilot were practicing takeoff and landings. After performing a stop-and-go on the 4,300 foot long runway, the CFI pulled the engine back to idle to demonstrate a simulated engine-out landing to the student pilot. The CFI reported that the airplane made a rapid descent from about 200 feet above ground level, he flared too high and the airplane landed hard on the runway. The CFI stated that the wind was 10 degrees from the runway heading, and gusting to 33 knots at the time. Substantial damage was sustained to the airplane's firewall. The CFI did not report any mechanical malfunctions prior to the accident.