Why would you want to sell your horse to someone who would never get it shod, has bviously hurt its back by galloping over stubble fields etc, you clearly dont like the horse then. Cut the loan.
I have not (deliberately) read anyone else's responses yet. So my gut feelings are as follows:-
1/ who's horse is it, basically!!! Yours - and you have the perfect right to end the "loan" at any time.
2/ normally with a loan the borrower pays for the shoes, and/or there's some arrangement made with the owner (in writing, in the contract)
3/ basically owner is a numpty rider and has thoroughly spoiled your horse to the extent that you may need to do some remedial schooling with it
4/ she had the chance to buy it and faffed around - her problem not yours
Now to boot she's badmouthing you to the extent that you feel unwelcome on the yard.
I think OP you have been more than generous, and forbearing to a fault.
It's high time that you took the offensive and ended this unsatisfactory loan ASAP if not sooner.
Get your horse back at the very earliest opportunity; give it the remedial schooling required and/or send it to someone to do it for you, and then look around for someone else who will appreciate the chance to have a horse rather than this ungrateful little madam.
PS I've loaned a horse in the past and whilst not had the situation you've had OP, I'd never do it again. The only loan I'd consider is to an equestrian college - which worked well for my boy when I did it.
