You did well to walk away, its easy to get caught up in the heat of the moment, especially when the apple of your eye is sitting there on the floor in front of you. Dont worry, for $250 & under you can get a far better folder, just need to do a bit of searching. Keep the little dahon at the back of your mind though, one day you'll see and advert for one at a sensible price, probably just round the corner, funny how these things work out.
Yeah, that sucks that you had such a bad experience. Just gotta find another store. Most bike stores that I have been to are great. So you're chances of finding a good one are pretty high, I'd imagine.
I have used a Single Speed and a 7 Speed Dahon Boardwalk for over a year now and both are great. I prefer the single speed for its simplicity. Gone 9 miles on it and it felt very comfortable. If you want cheap and an internal gear, go for their new economy bike the Eco 3. You can get it 3 speed or 7 speed (I think!). Try them out, you'll love them.
Don't be afraid to use your local Craigslist. That's where I got my 7 speed Dahon from. 125 (and it came with an upgraded adjustable stem). I bought my Single Speed new for 225 dollars. Both were great deals.
Edit: Heck, found your same bike for 80 dollars here in Dallas: http://dallas.craigslist.org/mdf/bik/1415608048.html