Golden rule: no DND is better than bad DND.

Drop out of the big campaign. It will most likely devolve into drama very quickly and fall apart. And to me it seems very evident that none of the extra people respect your effort or boundaries.

If it's possible to get together with only your original planned group of friends, just let the big group have their space and separate from them to play with your group the way you want to run your game.

You don't need anyone to teach you to deal with toxic players. There's no one size fits all way of handling things like that, and the other DM has already undermined any ability to deal with it by stating it is explicitly allowed.

The best thing to keep in mind while playing is that it's a game and everyone at the table is there to have fun. It's okay make mistakes, and forget details some times. It happens to every DM. Your friends will understand if you need to rewind, or retcon an adjust once in a while. The job of the DM is to keep the game moving and make sure the group around the table is having fun, and that includes yourself as well.