Sounds like a fantastic course you are involved in.
Our air traffic control challenge was enabling students to mentally convert 2D symbols of aircraft depicted on a radar screen into 3D air space mental models. I won't get too techie here but air traffic control involves maintaining vertical and horizontal separation between aircraft. Essentially you need to visualize each airplane as being surrounded by a volume of airspace that maintains separation with other planes a minimum of 1,000 feet above and below the plane as well as a certain amount of space in front of and behind the plane. Imagine a cardboard box (representing protected air space) surrounding each plane with the plane suspended in the middle. This is all fine when there are only a few aircraft but rapidly gets complex when there are many planes. A further complication is that air traffic control requires you to not only see where the plane is now but to also extrapolate forward where it will be in the future so that directives to change a flight path can be given well in advance. This forward extrapolation is complicated by the fact that each plane is traveling at different speeds. OK enough already. So the simulations partly involved creating representations of all the aircraft with their volume of protected air space surrounding them and showing projected paths for each plane based on its speed.
You point out that students often have trouble transferring digital experience to physical but in the case of air traffic control the task really is entirely digital. Most air traffic control is done entirely based on digital data. You also note that decisions were made to reduce lectures and enhance the practical side. We did that too. Essentially a series of simulations were developed that started out with just a few aircraft. Then when you mastered that many more were added until the level of complexity simulated real world scenarios. So students progressed from basic to advanced.
Its been many years since I did all this work so I expect things are even more advanced now.