Sadwoman, he's absolutely right - you do have to make a decision.
Taking it even further, it's not your place to argue over how he disciplines the kids. For what it's worth, the behaviour you describe indicates to me that he's a crap father, but that doesn't mean you get a say in how things go down. Instead of arguing over discipline, a more sensible approach would have been "this behaviour is unacceptable to me. If it continues, I will have to consider leaving" and then follow through if things don't change. Bearing in mind the ultimatum he's just given you, it's clear that he'd rather continue with his not good enough parenting than have you around.
You are sad that you can't hate him....but consider this: imagine the fights if the two of you had had kids together! Your own kid would have been totally screwed by parents who aren't consistent in discipline. If you do want kids of your own, then you've dodged a bullet.
Never regret anything that has happened in your life. It cannot be changed, forgotten or undone. So, take it as a lesson learned and move on.