"(e) Logging pilot-in-command flight time. (1) A sport, recreational, private, commercial, or airline transport pilot may log pilot in command flight time for flights-

(i) When the pilot is the sole manipulator of the controls of an aircraft for which the pilot is rated, or has sport pilot privileges for that category and class of aircraft, if the aircraft class rating is appropriate;

To the OP:

What I would do is print out the latest version of 14 CFR 61.51(e)(i) or take the new 2011 FARAIM to the CFI who said he wouldn't allow u to log it as PIC and explain the situation to him. Following what was said before, the CFI probably didn't actually read the newly worded rule for him/herself and is just going off of what he heard or was told (NEVER a good idea when concerning FARs).

If this doesn't work and the CFI still refuses to let you log it as PIC w/ his instructor signature on the dual time, go to his supervisor/chief instructor and explain the situation.