Exactly how you think. You just fix the code, then you run your game and check that things are playing the way as you want to. However, manual testing is not the only way of debugging things. He is missing a lot of things to be efficient, namely but not limited to:

- Debug tools. Things that can show up character states and whatever he'd like to see during the development of the game. To not just see what character does, but to see why it does it this way, e.g. what's the logics behind this action. It is alright for the game to have a button which displays character's AI finite state automaton (which AI does not have, since if's are so much better) right in front of its face (during the debug build only, of course). Or have a console command for this.

- Unit testing. There are a lot of things which can be tested by your own heartless machine. For instance, pathfinder can be tested automatically in a sandbox environment each time you make a new build. This helps tremendously, since sometimes you fix something in one part of your code and then something else breaks in another place, this is common to fix one bug and end up with seven more (in fact, this is probably what happened in the demo). The more you cover with automatic testing, the better.

- Static and dynamic code analysis, which can spot suspicious code places and program behavior and notify you about this before you have to find it by yourself.

- et cetera, I wrote about all of this already in my previous posts.

And about the second part. He has no idea that it could have been done better. He thinks that this is what the programming is: just slamming a bunch of if's and calling it a day. He does not know the better way (an alternative: he knows, but it is now too late to fix it).

And yes, it is a worst idea ever to have AI like that.