On October 2, 1998, at 1530 eastern daylight time, a Piper PA-38-112, N2535A, was substantially damage during a forced landing after takeoff from New Garden Airport, Toughkenamon, Pennsylvania. The certificated flight instructor (CFI), and student pilot (SP) were not injured. Visual meteorological conditions prevailed, and no flight plan was filed for the instructional flight conducted under 14 CFR Part 91. According to the CFI, he and the SP started to preflight the airplane about 1300. After completing the preflight, the CFI and SP entered the airplane with the CFI occupying the right seat. After a short discussion, the SP started the engine and taxied for departure. The CFI further stated, at the approach end of Runway 24 they checked both magnetos and noted a drop of 125 rpm. The SP then taxied the airplane onto the runway and executed the takeoff. The airplane accelerated normally, but after rotation and approximately 60 feet above the ground, the CFI felt a loss of power. He immediately took control of the airplane, extended the flaps, and started to "slip" the airplane. While slipping the airplane, the CFI confirmed that the primmer was in, the fuel pump was on, and the fuel selector was set to the right tank. The airplane touched down passed the departure end of the runway in a grassy field headed for a 30 foot drop-off. Unable to stop, the airplane went over the drop-off nose first. The airplane came to rest and the SP egressed per the CFI's instructions. The CFI followed, after closing the throttle, mixture, and shutting off the electrical master. According to the CFI he had approximately 1,700 hours of total flight experience, and 1,100 hours in make and model. In addition, he had about 1,500 hours as a CFI. The CFI added that the engine did not seize, and that the propeller continued to rotate till impacting the base of the drop-off. He added that on a previous flight with a different CFI, the same airplane experienced a loss of power during cruise flight. According to the CFI, maintenance personnel determined that the previous power loss was caused by a leaking fuel line. The engine was examined under the supervision of a Federal Aviation Administration Inspector. When the engine's crankshaft was rotated, compression was obtained on all four cylinders, the accessory gears rotated, and all magneto leads produced spark. According to the aircraft's operator, the fuel strainer was found locked in the open position and separated from the airplane. He added that because the airplane was parked on a slope, right wing low, the strainer would be higher then the right fuel tank. This would prevent fuel from continuing to drain even with the strainer open, providing the fuel selector was set to the right tank. He added that with the strainer open the engine would suck air via the drain. The pilot's operating hand book stated that during preflight to, "Drain and examine fuel from the fuel strainer on the left side of the nose section. The fuel strainer should be drained twice, once with the fuel selector valve on each tank setting." The CFI stated that his student drained the fuel strainer first with the fuel selector on the left tank and then with it on the right tank. The CFI added that they used the right tank for the takeoff.