We had a similar confrontation with an asshat at the train station in Beijing over Summer vacation. The dude tried to cut in line, my husband (who is also Chinese, so this wasn't a case of laowai rage) told him off, the woman at the counter told him to get in line, the guy tried to make some excuse about how he just wanted to "ask a question" or something, got belligerent, there was yelling, we bought our tickets, left, and as we were leaving my husband said something to the effect of "we'll be waiting for you outside," which, of course, we wouldn't be, but my husband just wanted to scare him I guess. It was all just a lot of bluster though because the guy was probably in his 50s, obviously couldn't take my husband in a fight, and was just being a blowhard because he was embarrased he got called out.
I've seen many a Chinese person get into it with fellow Chinese people over line cutting. So I don't think you were out of bounds and the guy's reaction was completely over the top. In my experience, line cutting is one of those behaviors that is often tolerated in this society, yet it pisses everyone off just the same, and people who do it know that they run the risk of getting told off if they do.