It's all in the wording...
I think a common misconception is a result of the poor legalized wording of a few things in this section:
The title of 61.195(b): "Aircraft Ratings." Considering the context, the title does NOT mean ANY RATING... it specifically refers to Aircraft ratings... as in aircraft-specific ratings, such as a multi-engine rating or single-engine rating that goes on your certificate (as well as land/sea). Also consider that 61.195(c) is entitled "Instrument Rating." Refering specifically to the instrument rating. (b) is saying that a flight instructor may not provide instruction towards an aircraft rating that the instructor is not rated to fly him/herself. For instance a CFI (without an MEI) can't train someone for their multi-engine rating (an aircraft rating). Just as a regular CFI can't give someone instruction towards their single-engine sea certificate. It's a different "aircraft rating". A CFI sea would be required to do so.
That being said... (b) does not apply to (c). Now as for the wording in (c): "a flight instructor who provides instrument flight training for the issuance of an instrument rating or a type rating not limited to VFR must hold an instrument rating on his or her flight instructor certificate and pilot certificate that is appropriate to the category and class of aircraft in which instrument training is being provided."
The big question is the how the sentence was meant to be read. Pay special attention to the underscored "and." The problem is... depending on which way you read it, it could mean two different things.
1. The "and" means that... "that is appropriate to the category and class of aircraft" applies to both the pilot certificate AND the flight instructor certificate. Meaning A CFII would also have to have a CFI to do an instrument in a single-engine, or an MEI to do it in a multi-engine.
2. The "and" separates "an instrument rating on his or her flight instructor certificate" from "pilot certificate that is appropriate to the category and class of aircraft..." Meaning the category and class would only have to be on your pilot certificate, and just a CFII would suffice.
I agree with #2 but unfortunately the ultimate translation is up to your local FSDO... It seems they all have their own answers. However, I can tell you this. There are a few misconceptions dealing with the CFII. Some people are under the impression that if you take your CFII checkride in a multi, it counts for a single as well, but not visa versa. The idea is because there is a single-engine instrument approach on the pts if a multi-engine aircraft is used for the checkride, therefore making it more difficult. This idea is false. The instrument is not aircraft-class specific. When you get "INSTRUMENT" added to your instructor certificate it does not specify whether the INSTRUMENT is multi or single. If you take your CFII ride in a multi, you can do an instrument in a single too. If you take it in a single, you can do an instrument in a multi too. Same thing for sea plane. If you get a CFI sea addon, It's not another CFII ride to take in order to teach instruments in a seaplane. You only have to take one CFII checkride to teach instruments in anything you are qualified to fly.
Unfortunately one thing I've learned about aviation is not to take anything as fact without a reference. Because there is lots of "he said, she said" going on, especially with all the inflated egos of pilots floating around. : ) I think I've beat this into the ground enough now. Any questions/comments?