I don't get the sense the therapist was trying to "police" them at all. They said people might perceive him as less male if he calls his chests "breasts." Maybe not a great move to give advice as a therapist, but hardly a reason to terminate therapy.

Therapists are humans who make errors and miscommunications just like everyone else. Part of going to therapy is learning to be able to talk through your emotions about these things, and part of being a therapist is continually repairing the relationship when it gets strained. If he brings this up with his therapist and gets pushback, that would be a different story, but that's unlikely to be the case given what we know. He should just tell her how it made him feel.