Dave,
I can really understand where you are coming from, becasue I, too, almost hung up my flying goggles after a lesson with a particulary abrasive instructor.
I was a very apprehensive student throughout the whole of my training, and I lacked confidence at every new stage of my learning. I was very susceptable to critisism, and wrongly assumed that I was the worst student at everything. And this sets the scene for my brush with a poor instructor.
Unlike you, though, this happened to me when I began the nav portion of the course. In the lesson, I felt humiliated, belittled, incapable (which was probably true) and utterly demoralised. When we had landed, the instructor told me that if I didn't pick up my flying abilities, then I would fail the skills test (which was a long way away, and which ultimately, I passed.)
I went home and thought about the same things you did, and felt like giving it all up. Why should a student (regardless of abilitly) be made to feel so bad after spending so much? Flying is meant to fun for God's sake, but that single lesson with that particualr instructor nearly finished me off.
After I had passed my PPL, I read through my student records, and couldn't believe what he'd written about me. Every other comment was positive, but his basically said, 'He has displayed the worst example of flying that I've ever seen in my life' - which is hardly a constructive critisism, and I'm sure that if I'd read it at the time, I would heve definitely given up.
I refused to fly with the above instructor, and although it was sometimes a bit tense when I would see him around, everything turned out better. (Incidentally, he was a very popular instructor, and his methods worked very well for other students, most notably young men in the teens - perhaps because they were still used to teachers shouting at them at school. )
The one thing that you've got to remember (which you probably already know) is that no instructor is ever alike. In the course of my PPL, I flew with ten different instructors and they all had a different teaching method. The instructor who I felt got the most out of me, was the one who was calm, collected and didn't shout or swear at me. (And it's ironic that out of all of these instructors, he is the only one flying jets as an airline pilot).
Don't give up. Change instructors or school. You have come too far now to throw it all away. Let us know what you decide to do.
Flock1