Oh man, it totally sucks that this guy is not willing to work with you more on the price, reception length, etc. He also should have represented the situation better (proximity to beach, his living quarters ON the property).
However, I will say that when I read your post I instantly remembered how BEAUTIFUL the pictures were that you posted here when you first booked the property. I was really floored by the beautiful landscaping and thought it looked like the perfect place for an intimate wedding and reception. Please don't second guess your choice too much...I really think this venue will make for a great wedding! And if I was one of your guests I would totally love to stay there with you and chip in on the cost versus staying at a hotel. Have you run that option by all of your guests?