Without knowing the context of what was said or the seriousness of it, I think you are correct, especially because of the grudge, best behavior, and them admitting to their toxic trait, as well as saying they wont change. As they said, what they said at the end being direct with you, you have to be direct with them, and I can only see bad things happening and you walking on egg shells with this person.

Edit: You are young and will meet many other wonderful people who don't act that way.