THE STUDENT COMPLETED A TOUCH & GO & WAS CLIMBING OUT WHEN THE INSTRUCTOR TOOK CONTROL. HE TOLD THE STUDENT THAT HE WAS GOING TO SHOW HIM WHAT TO DO IF THE ENG QUIT SHORTLY AFTER TAKEOFF. AT 150-180 FT ABOVE THE RWY NEAR THE UPWIND NUMBERS THE INSTRUCTOR CUT THE POWER TO IDLE, INITIATED A TURN TO THE RIGHT TO OFFSET FROM THE RWY & THEN BEGAN A SLIPPING LEFT TURN BACK TOWARD THE RWY IN AN ATTEMPT TO LAND DOWNWIND. THE ACFT DEVELOPED A HIGH SINK RATE AS IT APPROACHED A POSITIONPERPENDICULAR TO THE RWY. THE INSTRUCTOR ADDED FULL POWER TO ARREST THE DESCENT BUT THE ACFT STRUCK THE RWY WINGS LEVEL.THE PLT STATED THAT THE ENG FELT LIKE IT LOADED UP & DID NOT DEVELOP POWER IMMEDIATELY AS HE ADVANCED THE THROTTLE. EXAMINATION OF THE FUEL INJECTION SERVO REVEALED EVIDENCE OF INTERNAL LEAKAGE ALTHOUGH THE UNIT OPERATED NORMALLY ON A TEST BENCH. INTERNAL LEAKAGE COULD CAUSE HESITATION OR LOADING UP UNDER CERTAIN CONDITIONS.