It sounds like you did just fine. Sometimes if I'm behind someone who just keeps pulling and doesn't peel off, I offer to pull any time they want, just to let them know I'm not intentionally being a slug. I do wish people would just peel off - it seems so much more logical and efficient than having to sprint for the front.

I'm thinking this is a good spot to mention (and I'm not in any way suggesting that you said anything wrong) to always be careful what you say in a situation like that. I have a friend who tends to say things that make me want to punch her in the nose when she's feeling good and I'm not. Things like "I didn't really want to drop you, but I just couldn't go that slow", or, "That's okay, sometimes l like to go really slow, so I can work on my technique". Things that to her seem perfectly innocent, but when I'm struggling they sound snarky and belittling. My DH notices the same thing, so it isn't just me. When I'm struggling to keep up, I really don't need to hear that I'm too slow - I already feel bad enough about the struggling. And then it just makes me that much happier (in an evil way insert devil smilie here) on the days when I can put the hurt on her.

Personally, I think climbing hills is something you have to do at your own pace, and that regrouping is the best way. However, I do most of my riding alone, and rarely with more than about 2 other people. So I'm, not a group-ride authority.