Radio 'altercation' with ATC

Howdy,

I was interested in some other pilots' 'takes' on the following. I was
up with a student a few days ago, when another CFI I know (flying out
of the same airport I do) also with a student had an issue with an air
traffic controller. We were both flying out of airport A, which is a
non-towered airport near a fairly large city. Airport B is a class D
(non federal towered) municipal airport about 10 miles South of airport
A. The controllers at airport B have a reputation as kind of prickly.
The following is the jist of the conversation:

Cessna "Airport B tower, this is Cessna 123, 2000 off of airport A, 10
miles North, inbound landing with kilo"

Tower "Roger, Cessna, you will be number 2 for runway 21R, follow
Cherokee traffic at your 11 O'Clock, you also have Cherokee traffic
transitioning at your 2 O'Clock, and Skyhawk traffic inbound on the ILS
for the parallel. Maintain visual separation."

Cessna "Roger, have the Cherokee traffic, will follow him in, visual
separation"

A couple minutes later

Tower "Cessna, what are you doing out there?"

Cessna "Tower, that Cherokee isn't making much progress, we're making a
couple 360s for spacing"

Tower (in a nasty tone) "Negative Cessna! You're following the wrong
Cherokee. You need my permission before making any maneuvers like
that. If you are inbound, you need to be a direct heading *to* my
airport. You can't be doing that kind of stuff without telling me."

[pause]

Cessna "Tower, I was following the Cherokee that was at my 11. Sorry
if I got the wrong one. But sir, I am VFR, *outside* of your
airspace...if I feel the need to do a 360 to maintain safe spacing,
that's exactly what I will do...I'm outside of your airspace. I don't
need your permission to do *anything* until I enter it. Turning 210 for
landing now"

The controller didn't say anything else, expect a gruff 'Cleared for
landing 21R'. I haven't talked to the other CFI about this yet. The
reason I am asking is that my student (already scared to talk to ATC)
is even *more* scared now, and asked me about it.

I told him that the pilot was technically right...if you are in
uncontrolled airspace, and are responsible for maintaining visual
seperation from other aircraft, then you can certainly make 'normal'
maneuvers to do that. And I told him that a Class D tower controller
doesn't have any say about what you do outside of his airspace.

I also told him that it usually wasn't a good idea to have an
altercation like that on the radio. That if the pilot wanted to talk to
the controller about that, he should have waited until he was on the
ground, and called the tower and asked to speak with a supervisor. I
also told him that the other CFI 'probably' should have told the
controller what he was doing as a matter of 'courtesy', and that if he
wasn't absolutely sure which Cherokee to follow, he should have told
the controller that he'd remain outside of his airspace until the tower
told him the traffic was clear, and then turn in. Plus, it isnt a good
idea to alienate the ATC guys in your own area....they can make life
'interesting' sometimes.

But the tower controller didn't tell him to copy a number (altho maybe
he got that on the ground. But I asked a few of the other CFIs I work
with about this..most agreed with me, but a couple thought the pilot
was wrong for various reasons.
So...what is your take on this?

Cheers,

Cap