What to do about a new relationship with possible problems?(It's long, I warn)

[Leewest]

So, I met this guy online, he contacted me, and we started talking a lot.
Well, talking moved to a meeting, where we hung out for a few hours. From about 5- 10pm. We'd been talking almost four months before.
I noticed he gets kind of jealous and upset about the littlest things and he is really, I don't know, cocky, I guess the word is.
Like, if I mention a friend I talked to, especially if it's a guy, he starts bombarding me with questions about who it is, where we met, why he hasn't heard of this friend before. That bugs me and I don't think it's normal.
And he seems to get upset whenever our opinions don't match. Like once he told me about his friend and his girlfriend who had a fight and he asked me what I thought. I told him I really couldn't say without knowing all the facts and both sides. I like to be fair. And when I said that, he was like 'Are you serious? It's obvious she doesn't love him because he was using a rude tone and they haven't been intimate in weeks. How can you take her side?' I wasn't aware I was even taking a side. I said that I didn't know and honestly, I don't want to get into someone's relationship if they don't ask me personally.
I always feel like he's testing me, by asking me these questions where the female does something he thinks is wrong and the guy seems completely innocent. It's like the girl can never be right and he doesn't like accepting my opinions. It causes fights, and that annoys me a lot.
And last, seems to think everyone is beneath him. Like, no one is as smart, no one is as good looking, so one understand anything like he does. And while I'm happy he's confident, it really gets to an annoying point when he's always saying he's the best and the smartest and that everyone else is dumb and stupid. But he always adds, 'oh, well, not you, you're like me'. While that does make me feel a little better that he includes me in his 'perfection', it bothers me that he thinks everyone else is... well, not a bit good.

I like him a lot, though. When he's not acting this way, he's awesome. A great person to talk to and be around. The problem is, these times, are always spaced out. Like one week, he's great and normal, but then two weeks after that, he's upset, talking about how great he is, and being totally disagreeable and picking on every single thing I say or anyone else says for that matter.
What should I do? The relationships is still in it's early stages, I think, and while I do really like him, this different side of him annoys me and turns me off completely. I seriously get to the point that I hate him when he's like this.

[Beagle]

Major red flags here! If you feel he's testing you, he probably is. The day will come when you won't pass one of the made-up tests, because you're not sure what the criteria for passing are.

The first thing you need to do is put on the brakes on this relationship and don't let it go any further toward commitment until the two of you work this out. I know the relationship is great when this issue isn't a problem, but that's like having a ferrari that costs $15,000, gets 80 miles to a gallon, but explodes periodically. relationships aren't any fun if you're just sitting and waiting for the blow-up. Personality incompatibility is a major red flag, and that's what I'm hearing in your posts.

Ultimately, this is a conversation that only the two of you can have. If he is unwilling or unable to change, then the question for you becomes "Are you willing to live with this for the rest of your life?" If not, the kindest thing to do is to end it at this stage.

[Leewest]

Thank you for the advice.
In all honesty, it's what I've been thinking, practically ever since his first little episode.
He has so many red flags, or they seemed so to me, like this hating of American women(of which I am one). I won't say women are perfect, no one is, but he makes it sound like we're all pigs and unworthy of the male attention we get and that we are all against him. Paranoia, if you ask me. And it makes me wonder if he's bitter. I know he just broke up with his first real girlfriend in November of last year, apparently it was a really bad break where he did nothing and she had basically become a slut and cheated. Because of his attitude toward women, I can't really be sure that is what happened(this also caused another argument when I didn't agree that she was a slut because of what she did. I told him I couldn't decide what she was without knowing her side of what happened and that I don't talk badly about someone I don't know, anyway). For all I know, he was acting like this and she decided she couldn't take it and left, not actually doing what he claimed. He's so cocky and confident, that he probably doesn't see that how he acts is really annoying and not attractive and could be the real reason his last girlfriend left him. From what he told me, their relationship started out a lot like ours, she was happy and seemed to like him a lot, but then, suddenly, she started changing, not talking to him as much, not wanting to spend as much time with him, and a few of her friends he found (while looking through her texts) were telling her that he wasn't good for her and that she should break up with him. To me, that sounds like she was getting these little episodes from him and finally just got fed up with them. I've decided I'm going to try to talk to him tonight and see if I can get him to see my side. This, of course, usually ends up in an argument when I try to make him see what he's doing. He says I'm just being overly sensitive and twisting what's really going on to make it seem like he's doing something to me. And, in truth, while he's not physically doing anything, emotionally, he is. Like when I tried to talk to him last night, while writing my first post, he told me that I was trying to be different on purpose, because I told him I was thinking about a piercing. He hates them, so expected me to say I hated them, too. He then told me, I was trying to be different to 'fit in' with 'the rest of the disgusting human race'. Of course, I told him that I was a human, so I was going to fit in no matter what. So, he told me I was being smart with him and that I was going to start acting like some drugged out slut if I got the piercing. I tell him, I've never touched a drug or a drink in 21 years(which, for me, is never) so why would I do it suddenly because I get a piercing, he knows I wouldn't do that. And it was rude for him to assume I'd do all these things when I'd never done them before in my life. So, he says that someone must tell me about myself so I don't make the mistake of becoming an 'idiot human'. I was so tempted to say, someone needs to tell him about himself, but no one would be able to because he thinks he's so perfect and that everyone else is wrong, but I was getting weary and didn't feel like fighting even more.
I know I need to end it, but because I've never had to end it(this is the first time I've let a relationship get to this point, actually. I'm really shy and have been totally immersed in school since high school, so never really made much time for dating and all that type of thing), I have no idea how to do so, nicely. I mean, I want to still be nice, it's just my nature.
Once, he told me if I wanted us to just be friends, he'd be ok with that(not sure if that's really true), so I'm thinking of just saying we should just keep this as friends and not go any further. If he gets upset and doesn't want anymore contact, I think I'll be fine with it. I will miss when he was so nice and great, but I think having his negativity out of my more personal life, it'll be better. I wouldn't take what a friend said to heart as much as someone I'm trying to be in a relationship with, so friends would be okay, I think.