However, if I were to train at a school where the instructor felt it was his job to tell me what to do with the time I was not training with him, I would leave. I don't care if it was O'Sensei himself. I'd tell him sorry, but he is not the instructor I'm paying for.
Dunno about you, but I train under a teacher in order to get the skill that they have. If that means putting up with their quirks, I'm willing to do so to a certain degree.
Ueshiba had this relationship with Takeda...Takeda was dead serious on putting the beatdown (and more) on Ueshiba for starting his own school, if the stories about what happened at the Asahi Newspaper joint are true.
Certainly Ueshiba put up with a lot of cr"$ from Takeda cuz he desperately wanted Takeda's "Aiki" skillset.
Do you want the skill or not?
If you were training under O-Sensei and he said something of the sort, if its his particular skillset you're seeking, I'd highly doubt you'd simply say, well fine I'll go somewhere else then. (Since the whole reason you came to learn from the teacher in the first place is that he has something that no one else has)
It all boils down to "what do you want" from the person in question
The way I see it there's two issues at hand here.
First a conflict of understanding.
This whole student-teacher relationship doesn't have much room for the "well I'm the customer" mentality some students have outside of Japan.
OTOH, that relationship derives from the fact that the teacher has a skillset that practically no one else has or can teach. (Something I doubt the instructor in question has, but I could be wrong)
Anyways, devoid of that skillset, the student-teacher relationship demands do break down.
Which comes back to the question...maybe that particular instructor isn't worth learning from in the first place