"Customer is king" ONLY applies if your running a commercial dojo.
If you don't see your school as a wholly commercial enterprise then that saying no longer applies.
The underlaying assumtion of all your posts seems to be that people are teaching JUST for the money and I'm not sure that holds.
Many of the dojo I have trained in have been run by folks with a pretty good "day jobs" the extra money was welcome--but they certianly were not depending on it to make ends meet either.
As far as "who has the big ego now" commment--its also flawed.
The underlaying assumptoion THERE is that all other considerations should be cast aside when money is on the table.
If one does NOT worship at the feet of the "money is everything" alter then that assumption is ALSO moot.
If however one wishs to view it as strictly a business then AGAIN, there is no reason to assume that its about "ego" at all.
Perhaps the owner reasoned that it was "better" in the long run NOT to give in to the students demands.
Perhaps they activily market themselevs as a "tough no nonsense" teacher.
Perhaps they don't have the resources to indiviualize a class for each and every person.
Perhaps the person is in otherways disruptive and they would be better off focusing efforts on more lucritive students.
Point is there may be good sound business reasons why a business may choose to "fire" a customer.
Assuming that its ALWAYS about "ego" seems an error.
I went back and read thu the orginal post.
Does not sound to me like the teacher did anything wrong here.
Sounds to me like a snotty, bad attitude person who is sucking up time/energy and space that could be put to better use for more lucritive students.
From a business persepctive, sounds like she is unhappy all the way around and will probably quit anyway--so the less time, effort and energy you waste on them the better.
That is if your talking "business."