
Hi Vickyg,
If I was you, I would be back onto the breeder immediately, you are perfectly within your rights. Tell him what the vet said and ask if this is a problem that he was aware of. I think I know what his answer to this will be.
Obviously, you need to do it in a polite way and ask what his suggestions are. Unfortunately, it is easy to get carried away when you get a new puppy,especially if it is your first or second one and I bet that a lot of us have not asked the questions that we wanted to, or had a proper look at the puppy in its enviroment. Did you see the mother and litter mates?
As far as the money is concerned, its a difficult one, I think that you will just have to gauge the breeders reaction when you are speaking to him and perhaps mention that considering you may have to pay for an operation you feel that you would like some financial input, wheather he gives you some of the money back that you paid originally or contributes to the medical costs. Presumably you have had to pay for a vet consultation already, you could also point this out to him.
I have never had a breeder say they do not want to put a puppy down on the floor because of germs before. Was it at his home? Even if, in an outside kennel/run, puppies normally run around with their litter mates and mother, in my experience and they get a certain amount of immunity to germs from mums milk.
I have a dog whose paw turns out, but I didn't get her from a puppy and my vets view on it is that it's congenital. If it had been operated on when she was a lot younger it may/may not have been a success. But thankfully it has never caused her any problems, she has adapted to it.
I really hope that it all goes well for you, and let us know what the breeder said. Good luck :)