Well, first off let me say that I don't care for anyone "refusing" to do something that their class is capable of. Imho, you do what you need to for the benefit of the group. It's kind of like when you ask a shadow priest to off heal, or possibly even main heal one of the lower instances and they say, "I'm Shadow... I DONT heal." Blizz gave you a heal button, please use it if your groupies are about to die. Ok, end of rant... my apologies. Now for your quandry.
First, we don't seem to have any idea what level you and your groupies are, which makes it a little harder to answer you.
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do i heal just cause im better, or hope the the paly gets better with practise and stay shad?
Not necessarily. From the way you worded this, I have to assume that the pally would like to stay holy and continue to heal. That's fine. Pally's are the best SINGLE TARGET healers in the game based on class alone. I don't believe that they have ANY multi target heals as the Priests or Druids do. It's going to be a little harder for him to be the main healer in an instance because of this, but I'm sure it can be done and done well.
Basically, if you're going to leave your group specced as they are, it will work just fine... it may not be optimal (I think Emmit hit the nail on the head) but it can work. With your VE providing group healing for everyone, the pally healing your druid tank and you and the warlock dps'ing, I don't think you'll have many problems. Just please to be sure to watch your (and the lock's) threat so as not to pull aggro from the tank. The Pally may not be able to get to all of you fast enough to prevent your death and possibly a wipe.
And you can always drop out of shadow to help off heal too, if it comes to that.
As for the Pally not being a 'great' healer, I'd suggest letting him practice a bit in non-instance situations. Take your group out questing and well, let yourselves get into a bit of trouble so he can work on his technique. With four of you there, you should be able to get out of a jam if you need to.
You already said that this group seemed to work well together as they were. I really don't see a need to change it, you may just need to work with your pally a bit more to get him comfortable in the healing role.
Sorry for the long winded post.