Looking for traffic while IMC doesn't do any good, you'll just be looking at the inside of a cloud. If you do happen to see traffic, you're dead anyway.
While it's true that ATC doesn't know what maneuvers you'll be doing, they do give you a specific block of airspace, with both lateral and vertical limits, within which you can do whatever you please. They will keep other IFR traffic outside your block. Now if you're VMC, then there may well be VFR traffic in your block, but so what? You're VMC.
The maneuvers can be accomplished perfectly well under the hood, but here in Oregon, we don't have the luxury of VFR weather all the time. If you want to make any progress in the winter, you're going to have to suck it up and *gasp* go IMC sometimes. I won't do stalls or unusual attitudes IMC, or even steep turns, but other manuevers I will. Part of the CFII's job is to be proficient enough to recognize a dangerous situation developing and stop it before it does develop. When IMC, you can devote nearly all your attention to what the student is doing since looking for traffic is futile (though you probably need to watch for ice in this area).
You all would probably really flip out if we did this at night huh?