Disgraceful conduct by the dealer. Take your business elsewhere. It's the only way they'll learn.
As for the 4x4 alternatives, I've had the same dilemma as you - ideally I wanted something bigger than a Panda, but the wife won't consider a Yeti (the first one she saw was red, and now she refers to them as Postman Pat's car), I wasn't smitten with the Renegade, Tiguans are totally boring (both to look at and to drive), the new Disco Sport is too expensive, etc.
I'm going to take a look at the new Seat Ateca when it finally lands in the UK (we've had several Seats, and they've been great).