When do you cut your losses

That you asked and posted on here tells me that you have that gut feeling. "You bought the dog as an adult that was supposed to be working already" I think you already know the dog is not of the quality worth breeding.
There are already enough sub-par dogs being bred out there, so why contribute to that statistic right? you already have better dogs, so it would be real simple for me NOT A BREEDER IF HE IS NOT THE BEST.
You may very well want to be kind hearted and give him second chances and more time ect, thats okay if he is neutered he can be "mediocre" amd you can deel better knowing he is not contributing to possibly producing more dogs such as himself.

I don't mind owning just okay dogs, but breeding them dogs is somrething I don't believe in doing, Castrate him and give/sale him to someone that he will suit.