I see the interpretation of Olruggio's reasoning for not wanting to take on apprentices being that he would prioritize Qifrey over them and I raise you that that choice has nothing to do at all with Qifrey and is instead Olruggio knowing that in a crisis situation, he wouldn't be able to focus on apprentices of his own because he would prioritize saving as many lives as possible, and I also think he knows that if he did have his own apprentices and something did happen to them, he knows what he would end up doing, and he knows that he wouldn't be able to go there
Olruggio works so well as Watchful Eye because it's a role where he can be a mentor to the girls, but in the event of danger, he can focus on the larger crisis at hand rather than having to focus on them- he can leave their safety in Qifrey's hands, and be secure in knowing that Qifrey will prioritize them. his relationship with Qifrey also gives him the ability to, when needed, remind Qifrey of what his priorities need to be- as we see in Romonon, when Qifrey tries to pursue the Brimmed Caps, and Olruggio stops him and redirects him to the girls
I also think Olruggio does prioritize those girls over Qifrey. that's why his first reaction to meeting Coco and knowing forbidden magic was involved was to want to turn her in- his immediate thought was that he couldn't have Brimmed Caps around the atelier for the safety of the girls. keeping them away from Qifrey and his obsessive hunt for them is part of that; Olruggio flat out says he thought that Qifrey was taking in apprentices and settling down, dropping this hunt. Olruggio might've been willing to let Qifrey do his thing before, but now he's got apprentices, and he can't be taking the same risks as before because that would put the girls in danger. he ends up folding on Coco of course, but this is only after he actually has a conversation with her and sees her passion for magic firsthand, and sees that she's not involved with the Brimmed Caps, she's their victim
Olruggio also gets well and truly furious with Qifrey every time he thinks Qifrey might be putting the girls in danger. for all the years they've spent together, he doesnt automatically trust Qifrey to have their best interests and their safety at heart, and questions him and challenges him when he feels its necessary. he challenges Qifrey for leaving the apprentices' sides in Romonon. he challenges him on starting back up his hunt for the Brimmed Caps. he challenges him on hiding that his sight is starting to fail. and, of course, part of it is that Olruggio is worried about Qifrey as his friend, but he textually puts the girls above that concern. Olruggio knows that at the end of the day, its his job to remove those girls from Qifrey's care if Qifrey can't be a trusted and safe caretaker for them, and he takes that job extremely seriously. I fully believe that if it came down to it, Olruggio would take those girls if he thought Qifrey was a danger to them
as for the last point- we also already have textual evidence of just what Olruggio is willing to do if apprentices under his care get hurt. he thought that curtain leech demon killed Coco and Agott, and he immediately abandoned his no kill code and was ready to burn the entire thing to the ground. Olruggio, who was devastated when his non-sentient magic pouches were getting destroyed, was ready to take a life because he thought his girls were dead. in the role he's in, as Watchful Eye, he can throw everything he's got at a monster and cast to kill. if he were a teacher, like Qifrey, he couldn't- and that's why he cant be a teacher, thats why he cant take on his own apprentices, because he knows he wouldn't be able to stop himself from going after anything that hurt his students with all his might
all this to say that Olruggio is an excellent Watchful Eye and yes, he would be a great teacher (and frankly is to the girls, he is a teacher to them after all, his role just allows him certain freedoms he wouldn't other wise), but he's much better suited for the position he's in and I think to act like his choice to not be a teacher is entirely because of Qifrey is a disservice to his character
