GA SMA ON TRAINING FLT TAXIED PAST RWY HOLD LINE CAUSING SMA ON FINAL TO GO AROUND.

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STUDENT PLT AND FLT INSTR XED HOLD LINE WHEN INSTRUCTED BY ATC TO HOLD SHORT OF RWY 07R. FLT INSTR STOPPED ACFT; BUT TOO LATE. FLT INSTR ASKED STUDENT WHAT HE WAS DOING AND WAS TOLD ATC CLRNC WORD FOR WORD; BUT STUDENT THOUGHT THAT THE CLRNC MEANT SOMETHING ELSE. FLT INSTR RETURNED CTL TO STUDENT TO REMAIN STOPPED OR RETURN TO RUNUP AREA; BUT STUDENT CONTINUED TO TAXI ONTO THE ACTIVE RWY. IN THE MEANTIME ANOTHER ACFT TAXIED UP TO THE HOLD LINE MAKING IT DIFFICULT TO TAXI OFF THE ACTIVE RWY; SO STUDENT AND FLT INSTR WERE COMMITTED TO TAXI INTO POS AND HOLD ON RWY 07R. THIS ACTION CAUSED A LNDG ACFT TO DO A RIGHT 360 DEGS TURN FOR SPACING UNTIL WE DEPARTED. THE LNDG ACFT WAS 1/2-1 MI FROM THE LNDG THRESHOLD WHEN THIS INCIDENT OCCURRED. THERE WAS NO ACFT ON FINAL AT INITIAL INCIDENT TIME PERIOD. SITUATION OCCURRED BECAUSE STUDENT-FLT INSTR MISCOM. STUDENT THOUGHT ATC INSTRUCTIONS WERE TO TAXI INTO POS AND HOLD; BUT IN REALITY ATC INSTRUCTIONS WERE TO HOLD SHORT RWY 07R. FLT INSTR THOUGHT STUDENT UNDERSTOOD THE ATC CLRNC; BUT HE OBVIOUSLY DIDN'T WHEN HE RETURNED CTL OF ACFT TO HIM; HE STILL DIDN'T UNDERSTAND THE CLRNC WHEN HE THOUGHT HE UNDERSTOOD IT THEREFORE XING HOLD LINE. FLT INSTR SHOULD HAVE TAKEN ACFT OFF THE RWY THE FIRST TIME; BUT DIDN'T BECAUSE HE THOUGHT THE STUDENT KNEW THE SITUATION AND WOULD ACT ACCORDINGLY. DAYTONA BEACH REGL ARPT IS A PRIMARY PLT AND ATC TRNING FAC IT WOULD BE ADVISED TO HAVE CTLRS MAYBE SAY ATC CLRNCS SLOWER DUE TO THE HIGH VOL OF STUDENT PLTS; IN MOST CASES ATC ISN'T TOLD WHICH ACFT ARE PILOTED BY STUDENT PLTS OR ABOVE ATC ASSUMES THAT THE PLT IS A PVT PLT OR BETTER; BUT MAJORITY OF ACFT ARE PILOTED BY STUDENT PLTS OR LOW TIME PVT PLTS. THE FLT INSTR SHOULD HAVE INFORMED ATC THAT THERE WAS STUDENT PLT ONBOARD OPERATING THE ACFT AT THAT TIME.