Check the school handbook to see whether there is an administrative procedure that you must follow.
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If you want to get your self-respect back, you should strive to get good grades in your class. If you want to waste a lot of time and money in court, you should file a defamation suit. Unfortunately, I don't see damages sufficient to file suit here. Best of luck with your new career in nursing.
As an attorney who has handled dozens of cases about and for nurses, let me share this with you: an RN needs to be able to take a punch and choose not to notice. The situation you describe here is a meaningless and unworthy tempest. Do these things:
1. Rise above it.
2. Have a heart to heart with the instructor in which you take some responsibility and sincerely apologize for your part.
3. Re-calibrate your humiliation/distress detector.
Good golly but you are going to have a tough road ahead with the doctors if you can't handle this kind of stuff better than you have here.
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You essentially called her "stupid"; you object because she reported that you said "dumb-ass" - aren't you splitting hairs. Additionally, you weren't kicked out of the class, just "suspended for the day", so you really have no provable economic damages. You will gain back your "self-respect" by completing the course successfully.