As discussed elsewhere on this forum, having a 70 run your lowbies through instances is an enormous boost in leveling speed but you'll learn nothing about playing the character or the team as a whole.

Having said that, I personally prefer to use my 70 mage to AoE the living (and undead, actually) crap out of instances until level 40 just so I don't *ever* have to run around without mounts when I do actually quest!!

After that, it's instances for the quests, to gear up a bit, and for money, and non-instance quests to actually level.

Trying to level a team purely in instances in Outland is just plain silly in my opinion, having tried it for myself, but that is BY FAR where you'll learn most about your team.

Balance is the key. Pure questing, even if you ignore the mind-numbing collection quests, will have you slitting your wrists because it's just dull, and pure instancing will have you slitting your wrists because of the sheer time it takes to level beyond a certain point.

edit: correct pre-cofee-stream-of-consciousness-ramble /sigh