First off, size is in no way a guarantee for a female orgasm. Making her cum depends on so many factors - hitting the right spots, emotional connection, supplemental touching on her part, her overall level of arousal, and a bunch of other things which vary from woman to woman.
In any case, my guess is that size isn't a huge deal to her, but she did immediately pick up on the insecurity you have regarding your johnson and so leapt on the opportunity to put you down in the heat of the moment. That's why I never, ever make a comment about my own dick to a girl. I let her think what she wants about it, and I never let on that I've got self-doubt about it (mainly because I don't). But the point is, if someone knows it's a sore spot for you, you're more or less putting a target on your cock when it comes to future arguments. That's why I will always say whatever you've got, swing it with (quiet) pride.
As far as whether you should break up with her or not, that's your call. Lots of people say stupid things in the middle of a fight, and in fact, I'm inclined to think that if you dump her over the dick comment, you're just making yourself look even more hung-up about it. I would take some time away from her and think about it all properly. If you do decide to carry on with her, avoid dick-talk and remember to stay calm and focused during an argument, or else walk away from it before it turns truly nasty.