This short blog post on a software blog points to this longer post on whether it's possible to truly be an effective teacher in a subject with which one has little current practical experience. Although the post ends up having to do with math teachers, the author specifically cites his own piano teacher, who spent his days and nights playing piano, as well as a number of other teachers who live the subject they teach.
In my philosophy, teaching music goes beyond teaching my students the mechanics of playing the instrument. I'm not even referring to the nebulous concept of "musicianship" here, because so much of that comes from simply growing up, but the experience of being a musician.
Through being a musician, I've learned enormous amounts about how to behave professionally, that there comes a point where merely competent but reliable musicians get hired more often than exceptionally talented but flaky one, that you don't badmouth your colleagues, teachers, students, students' parents, venues, wedding planners, conductors, etc.*, that you don't get gigs if you don't call people back, and so much more, all of which is equally applicable to life outside music.
No, I'm not going to try to explain all this to the six-year-old who's struggling through Go Tell Aunt Rhody, but I am going to show them how to take care of their things, explain why they should listen to their teacher and parent, disallow any teasing in my group classes and give them enough responsibility that it's noticed when they don't practice or show up for lessons.
So while I think it's a bad idea to try to teach an instrument you've never played (and I mean, never even touched), I also think it does your students a disservice if you've never been a working musician on any level, and this idea, too, is applicable to any field.
*Badmouthing is not the same as venting. Venting is fine, as long as you're careful about to whom you choose to vent.