This is a great discussion. I would agree with both of you on pointing out what works as well as what doesn’t. It’s important to be balanced, in my opinion.
I do well with copy editing, grammar, spelling, stuff like that, and am working to be better at critiquing ideas, plot, places where an author is telling vs. showing, etc. Those are harder to critique on, but that is important. I always point out what I like as much as what I think might be detracting from the story.
I like to turn on the comments in Word and make notes as I go.
Miranda, about your last point with characters acting out of character, I saw this wonderful quote by Margaret Atwood that advised writers to go back to the fork in the road, that place where you went wrong, and rewrite from there. This little nugget has helped me both in editing my own work, as well as others. Identifying the exact place where things went wrong can be key to saving a manuscript.