I am not sure why your priority concern is gifting? As POA, your duty is to manage things according to the best interests of the donor. Where they have lost capacity, you can continue making the gifts they would normally have made (eg birthday presents to grandchildren) but you should not be seeking to gift away their money for the purposes of reducing a tax or care liability. I would particularly counsel against taking such actions secretively - trust is paramount in these situations and once lost cannot easily be regained.
I think it depends on whether the donor is aware and lucid or not. We usually think of a POA being used only when someone is incapable. But in fact a POA can be used at any time. So if a donor wishes to make gifts, or the attorney genuinely believes that the donor would want to make gifts, then I don't necessarily see a problem.
I think the issue in this case was more the suggestion that the donor and the recipient might collude to make gifts in such a way that the donor might continue to benefit from the gift in some situations. I think you'd have to be very cunning to do that in a way that doesn't fall foul of either "reservation of benefit" rules or "deliberate deprivation of assets" rules. But even then, if care is not needed or IHT isn't relevant, then it might not matter anyway.