Wow thank you everyone for taking the time to reply!
Vene: In hindsight, I agree-going to the director was a bad call. Even though the director agreed with me, in the end, I'm the one who has to see him everyday and has to take the repercussions.
I don't know think going to the director for help is going to do me any good. It may even look worse that I'm going to her again for an issue against my boss. My colleagues have witnessed all this firsthand and I also have good relationships with other profs in the dept so I'm not worried they will think that I am the issue.
I'm not a princess either and this job is actually very low paying. I don't get Healthcare and I am paid less than what I should be with my qualifications and experience - yet I took this job because I knew it would do wonders for my cv and give me the research experience I need for grad school. I have two other pt jobs to support subsidize my income which is why quitting my main job would be doable. (I work weekends and Friday nights)
Themmases - sorry to hear you went through something similar. I hope things turn around for me too but I know I should also prepare my resignation in case anything goes wrong. The 'future reference' is also something I'm worried about but I hope that once I'm in grad school, my new supervisor will be my reference and as the years pass, his reference will be less relevant.
Thanks guys for the input. For now I'm going to stay put. In my mind, I think if I tough it out, at least he can't write to my new supervisor for leaving before my contract ends and he cannot ruin my reputation at my current workplace by making it seem like I used him for the LOR and left him the moment I got an acceptance.