OK, here are my two cents as a dog trainer. To answer your first question: no you are not crazy, this is not your fault!
By now your dog is is who he is at this age. At this young age it will only get worse in unexperienced hands, so let's be realistic and look at his options:
1. Returned to the breeder who may sell him to another trusting potential adopter or put him down.
2. Re-homing the dog yourself with the risk that in a few weeks someone stands on your doorstep because he seriously hurt someone else.
3. Finding a home that is willing to work with an unstable dog. Where in the world would you find someone like that who is not a hoarder? Let me speak to you from my personal experience:
Years ago I fostered a litter for the shelter . The mother of the litter was an aggressive dog. I kept her away from he litter when we had visitors so the pups wouldn't learn that from her. At 7 months old one pup was returned as the shelter completely had disregarded my advice for each pup's ideal home. This pup had bitten their child in the face. I took her back, thinking I could work with this dog. My own dogs were afraid of her, she failed the temp. test with an animal behaviorist and me. So I made the toughest decision to put her down, to prevent her from a life of abandonment in a back yard somewhere, abuse and going from shelter to hoe to shelter, ending in her death anyway.
It was heart wrenching but I did it because I loved her, I kept her safe. No one could hurt this dog anymore.
So in your case, if you can legally(contract-wise) do it, I would do the same if, after giving it your all, you cannot guarantee a safe home for him.
Last edited by wolfy dog; 12-05-2012 at 08:21 PM.