Okay, I just joined this forum and I can't believe my first reply is on a topic as cerebral as this. But while I'm a noob to this place, I've only been playing music for 47 years...so here goes.
I agree with Supercreep. It truly does depend. It depends on the venue, the audience (if there is one...some of my best musical moments have been just me and one of my favorite guitars), the message in the music, the reason for the performance and many other things.
Someone who can do two hours of campfire music with a bunch of close friends can very easily be considered a good guitarist if everyone goes home talking about what a great evening they had.
A performer who just laid down bux for studio time and is expecting the hired hands to be quality tracking musicians would consider you a good guitarist if he left with a mix that exceeded his expectations coming in.
Your own band will consider you a fine guitarist if you can adapt quickly, play the gig in a manner consistent with the groups genre, be strong in your performance skills but humble in your self image and promote success of the group. I can't tell you how many times I've heard an otherwise functional musician ruined by 'the dude's got skills but I just can't put up with his crap!'
I'm a bass guitarist who can simply hear the right song at the right time and get huge goose bumps, a lump in the throat and tears in my eyes. I carry music on my heart. I believe that is the basis for any good musician. But the band whose bassist is sick, or walked out the day before a big gig doesn't give a throbbing wanker about my heart....what they care about is that I can step in on a moments notice, perform as well as or better than the guy who should have been playing that nite, and leave their fan base saying nothing less than 'See, I told you those guys are hot!'. That nite isn't about Me...it's about them!
So it all depends on what the guitarist wants to be...that decides what a good guitarist IS.
So, Scoot....what's your guy want to do with his gift? Find the answer to that, and you'll have no trouble helping him understand what it takes to be good at it.