I'm so sorry to hear about your sweet little pup being so sick.
Gosh, this is a really hard situation.
Let's see...
1) Someone is willing to pay for the dogs surgery, but they get to keep the dog when the surgery is done? I think that is nice of that person, but somewhat cruel as well.
2) You have him put to sleep and he doesn't get the surgery.
Well, think about what is right for him, no matter how much it hurts you. What would be right for him is to give him an opportunity to live... even if that means you won't be his Mom anymore.
I had to make a hard decision like this a year ago. I was never home and my dog was acting out. She was also sick and I couldn't afford all the vet bills. I finally gave her to a new home, because I knew it was best for her. I cried my eyes out, but only for one night. After that I told myself I wasn't allowed to cry anymore, because I did what was best for her.... I did the right thing.
You see, the right thing doesn't always feel good to do... even if it's the right decision.
I wish you the best of luck in deciding what to do.
"Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather, to skid in broadside thoroughly used-up, totally worn out, and loudly proclaiming: WOW WHAT A RIDE!!!!"