I've seen people progress within the dojo who have demonstrated real character flaws. Arrogance, a propensity to show off, a disregard for other people's boundaries being just a few. I've never seen a change in their character. I've seen them obscure their nature but it's always still been there and has always ended in acrimony. Some people shouldn't train in the martial arts and people shouldn't feel obligated to teach someone they don't like or aren't comfortable teaching. With regards to the situation in question I wouldn't presume to know what your instructors know or what motivates their decision making. The culture of a dojo can very easily be derailed and it's the prerogative of the chief instructor to protect what they've created.