My kids both went through music lessons, and I believe a lot of this "culture" is brought by hyper competitive parents. It's not inherent to the process. The Suzuki method (which is the dominant variant in the US today) starts kids playing by ear, and involves them in as much group playing as possible. You can't get in the habit of stopping, if nobody else stops.
Imposed on top of this is a culture of treating it like a contest. This is an easy trap to fall into, because the repertoire is organized by difficulty. But I quickly noticed that the most laid back parents were the ones who were performing musicians themselves. I'm a performing jazz musician so my kids have heard me play plenty of clams on the bandstand without stopping. ;-)
The parents have to get out of the habit of stopping their kids when they make a mistake. I read a comment from a famous teacher, that he doesn't stop his students when they make mistakes, because it kills their flow. Unless the mistake is repetitive. Isolated mistakes are not teachable, repetitive ones are.
My daughter's teacher had a really nice thing, an open recital at his house every Friday evening. Because it was so frequent, kids could just show up and play whatever they were working on.
There are alternatives to traditional classical teaching. In addition to their classical lessons, my family has gotten into fiddling. That's a totally different vibe. We went to a fiddle jam, and recognized one of the fiddlers from the previous night's symphony concert.
Now for my own opinionated opinions, not necessarily contrary to yours: 1) At least in classical and jazz, a player has to get over the hump and learn to play in tune at some point. In any event, intonation problems typically reveal technique problems. 2) "Feel" is not orthogonal to technique. Wherever the note belongs, your brain and body working together have to put it there. And "feel" is anything but absent from classical music -- you just have to listen harder for it because it's more subtle. You can hear it when it's too rigid.