Well sixgears, you have definitely found yourself a winner. If you were a fisherman I would say throw it back in the water. If you can (and they allow you too), finish your classes/pool sessions, tell the LDS owner whatever he needs to hear without committing anything to him, get your referral and never look back. As TSandM has said, the dive shop has to make money and some do it honestly and in and up front manner which works to win back business. Others do it in an underhanded and sideways way which gets them some money but rarely wins them any recurring business.
By the way, if you had already paid for your sessions in full prior to the second class, then you are OK. I had to pay for mine up front....maybe I look shifty and untrustworthy.....so I expect you did. That said, you can tell the LDS that he has no right to increase his price and that you will not pay anything more. If he does anything stupid like refuse you your referral, three letters - BBB (Better Business Bureau) to start. I think you just need to get away from them....it creates a poisonous environment.