My friend, if I was treated in this manner I would not ever grace those halls again.
Good. But I'd continue to look for a replacement. It doesnt sound like you really want to be there.
Agreed on both counts. I would not stay somewhere that firing on a whim was considered a reasonable response. I know that one need not have a reason to fire someone, but firing as a response to asking for a raise is ridiculous, unless there was some really crazy behavior or ultimatum thrown out in the "request".
You either have to hire in at a good rate, change positions and negotiate an increase, or threaten to leave, but be willing to follow through if they call your bluff.
Personally I find needing to give ultimatums a problem. If you have to do that, you need to go elsewhere. Whenever I have said I was leaving a job, I did it. I have never used I'm leaving as a negotiation point, nor have I ever reversed a job decision to leave, once I have made it.