This question is to experienced testers or test leads. This is a scenario from a software project:

Say the dev team have completed the first iteration of 10 features and released it to system testing. The test team has created test cases for these 10 features and estimated 5 days for testing. The dev team of course cannot sit idle for 5 days and they start creating 10 new features for next iteration. During this time the test team found defects and raised some bugs. The bugs are prioritised and some of them have to be fixed before next iteration. The catch is that they would not accept the new release with any new features or changes to existing features until all those bugs fixed. The test team says that's how can we guarantee a stable release for testing if we also introduce new features along with the bug fix. They also cannot do regression tests of all their test cases each iteration. Apparently this is proper testing process according to ISQTB.

This means the dev team has to create a branch of code solely for bug fixing and another branch where they continue development. There is more merging overhead specially with refactoring and architectural changes.

Can you agree if this is a common testing principle. Is the test team's concern valid. Have you encountered this in practice in your project.