During a practice touch-and-go landing, the student pilot did not properly maintain runway alignment during the landing flare. The flight instructor took control of the airplane as the wheels touched down on the runway, and attempted a go-around. However, during the go-around, the flight instructor did not retract the flaps to 20 degrees, which the normal procedures require. Subsequently the airplane bounced, landed in an open area adjacent to the runway, and came to rest upright. During the accident sequence, the airplane sustained substantial damage to the wings and horizontal stabilizer. The flight instructor reported that there were no preaccident mechanical malfunctions or failures with the airplane that would have precluded normal operation.