If everything happened exactly as you say, with no exaggeration, I would consider the situation to be a serious problem. I have never known a CFI to behave in that fashion (violent aircraft manuevers), and any who did at the places I have worked would have been terminated immediately.

While I would normally be loathe to go to the FAA about individual pilot actions, the one exception is a situation where emotional stability or serious judgement failure is an issue...was it an honest mistake that he learned from? I sounds like he didn't really take it to heart...

This guy needs at least a serious beat-down that he will never forget, and possibly an aeromedical evaluation. If you feel that he's not quite stable or if he might do this kind of thing in the future, yes go to the local FSDO (be sure that all of YOUR regulatory ducks are in a row regarding that flight).

You're the only one with enough info to make the decision. Do you think you might read about this guy in an NTSB report? How would you feel if at some point in the future he killed someone other than himself?