Based on this account (and I agree it could be quite biased), the manager did a poor job of de-escalating the situation. I assume the OP had aired similar grievances previously, so the manager should have been prepared for this conversation.

Regardless, if an employee comes to me so stressed out they can’t work, and asks to take an afternoon, I’m sending them home. I might very well start the PPI process as they’re driving home, if I thought the situation was unrecoverable.