I am, like some, concerned that we don't really know exactly what happened without having been there ourselves.
The swim test is usually an option: swim 200 yards unaided or 300 yards with fins and snorkel. In my experience, the people who choose the fins and snorkel are afraid that they do not have the swimming skills to do 200 yards unaided. I am sorry that you never had experience with fins before, but if you were using a bicycle kick--as it sounds like you were--so seriously that the fins were ineffective, then it is very possible you would have trouble completing the unaided swim as well.
Here is an important digression that may be illuminating:
A couple of months ago I was working with a class in which included a wonderfully graceful swimmer who did the entire 200 years in one continuous freestyle, with no apparent effort. I later learned that only a little more than a year before, she had had a horribly traumatic experience in a discover scuba class in Australia. They had pushed her through the basic skills, which never provided them with an opportunity to discover a key fact: she could not swim! OK, she could struggle along on the surface, but she was not really a swimmer. Once in the ocean, she went into a full blown panic and had one horror of an experience, including a near drowning.
When it was over, she looked herself in the eye and decided she was going to do something about it. She took swimming lessons, and before long she was that Esther Williams double I saw in class, and she completed the class masterfully.
It appears from reading this thread that you are going to be able to continue to learn and get to the end of your lessons, which you initially feared was not true. It may be that the instructor made the decision upon seeing you in the water that it was essential for your own safety that you pick up more basic swimming skills before going on. Delaying your training may have been the best decision for you. Without really seeing what happened, none of us can really know for sure.