Several things were happening. I will try and best explain. Your experience is typical of a strong gsd with good drives and with a trainer that only understands one way of herding/working a dog on sheep.
What the trainer was trying to do was not necessarily 'wrong' or bad....just was not working with your dog. They may also be correct in a couple of things but perhaps also very narrow minded in thier herding experiences.
I took my pup to another trainer for herding lessons this weekend and I was a bit put off by the experience. First, I thought she had experience with GSDs but now I doubt that. He is 71/2 months old about 70 lbs. He got in the ring and started doing his thing and then when she wanted him to turn the other way she smacked her cane on the ground in front of him. When he didn't turn she smack the hell out of him with her cane that also had a little whip on the end of it. He yelped in pain and barked.
Smacking the stock stick (cane) in front of the dog is in hopes that it is going to 'give' to this pressure. The stock stick is not the only tool used in accomplishing this task. Body pressure/placement is also used. I have NO idea if the trainer was in the right position to have the dog give to the pressure or turn.
It *sounds* like your dog likley did not really want to give to the pressure and/or the trainer. The dog *likely* did not acknowlegde or see this trainer/person as someone IN thier picture. It was just the dog and sheep. Common with some dogs and OFTEN puppies. Thier prey drive takes over and it is just 'fun'...get to the sheep etc. MOST dogs will 'give' to the pressure of the trainer/new person right away as they do not know them and usually have not figured out if this person is going to make them do something or not. Dogs as well as sheep will 'read' the power of the person and will decide if they need to listen or not.
Likley as the dog did not 'see' this person in thier picture with the stock stick being banged on the ground the trainer 'upted' the anti by now using it on the dog.
It does not sound to me like your dog was actually yelping in pain but more likley out of surprise. Had it been pain...your dog would have likley quit/and/or backed off from the trainer (doesn't sound like the dog did that?) Instead it sounds like your dog got more ticked (started barking) and was aruguing with them.
This is also likely why the trainer continued to 'dominate' the dog. Wanting to 'win' the arguement.
Now, from what you describe a couple of things come to mind. First, it would *seem* that the trainer is correct in a few things. First, your dog is intelligent, sassy and likely does have a higher opinion of self (hard to know if the pup/dog was barking/fighting because of this or also with some fear involved without being there and seeing it in person. ) The trainer is also likley correct in saying need to get our relationship in order or he is going to be a real problem when he is mentally mature especially since he is a lot of dog.
That is not a BAD thing though! Where I differ in what all happened is that strong minded dogs do not need to be beaten or physically shown that they need to submit to alpha. It is about a MENTAL connection/relationship with your dog. Yes, at times you will need to be firm physically with the dog but the dog must submit willingly to your authority because it chooses to. Because you have built that relationship with your dog. Genetic obedience helps or makes this easier. Handler 'hard' dogs make it more difficult. The type of person you are and your power level also contributes.
Your dog is still a puppy!!!!!! Lots to learn. As well, male pups between the age of 4 months to 11 months have TWICE the amount of tetosterone than adult IN TACT males. They ARE full of themselves. It does get better as they mature into an adult. That doesn't mean you leave things/training until they are older.
Without really 'seeing' what was happening it is real tough to know if the trainer was way out to lunch. The trainer took your pup and tried to fit it into a 'box' of what 'all herding' dogs should do. GSD's were NOT bred for this. Many adapt to it and do well but they were originally bred for working farther off sheep, on larger numbers and likely larger sheep. MANY trainers are afraid of the stronger gsd's and get way tougher on them than likely is needed. What is REALLY needed is a better understanding of the breed, what it was bred to do and how to bring out the best in the dog.
WIthout knowing all the details of what happened I would have liked to have seen the trainer put your pup/dog back on leash and work a bit on control and seeing 'me' the trainer in the picture. This is accomplished in a number of ways. Intially I take a pup/dog on leash and just 'be' with it and work with it a bit. A bit on stops, and comes. Seeing 'me' as someone that they will be working WITH in the ring and sheep. I then would have taken the dog in ON leash and worked it the same way. At this point, I would have already talked with you about your dog, what I am seeing, and what kind of corrections I 'may' need to do/use and are you comfortable with it.
A pups/dogs first experience should be postive and controlled. I don't want the pup/dog thinking that this time on sheep is a free for all where they get to chase and have fun without rules. The more they listen the more freedom they get.
On occasion I have taken a puppy, worked it on leash with the sheep and then stopped. I had a Standard Poodle with a TON of prey drive and confidence that was 8 months old. I felt that I would need to give stronger corrections to the dog than I would have liked at his age. My advice was for the owner to work on some obedience with her dog,let it mature a bit more and then come back.
On occasion I have worked a dog that REALLY does NOT want to see me in thier picture. They are handler hard, not real biddable, and it is a fight for the alpha position. My first gsd was like this. She became a multi high in trial dog, earned her advanced herding in several avenues and is Canada's No. 1 Herding gsd. It was a LOT of work getting there but I learned a ton along the way. One thing I learned was I wanted/needed more biddabiilty in my dogs. This is NOT softness. It is a dog that wants to work as a team. When you have that...your dog can be a super high drive dog...you will still succeed.
Your dogs experience was not about 'knowing the rules' , it was about not 'giving' to pressure. A good trainer will be able to bring out the BEST in your dog regardless. However, you are correct in saying your dog did not understand what it is the trainer wanted from them. It is the trainers responsiblity to TELL and SHOW your dog what that is so that they understand. This trainer did it in a way that was not necessarily the 'best' choice for your dog.
As far as what the trainer says about SchH dogs. Well....some high sport dogs may not make the best herding dogs compared to others because of the few things she mentioned but in my experience those are FEW and far between. Almost ALL the gsd's I have ever worked (and I have worked a LOT) would be awesome at herding. (I have worked dogs from all lines and SchH titled dogs as well). I have had hard core working line people bring thier dogs out and think they are going to 'kill' the sheep....far from it.
Would love to know the trainers name but perhaps you should PM it to me and not post it publicly.
As far as continueing...... I would be REAL careful about working your pup/dog with a person that sees all herding dogs from one perspective. Would hate to see you ruin your dog and take the 'life' out of him.
Shelley