Low ranking university with fund VS Unsure opportunity at a higher ranking one
The answer is clear, and has nothing to do with ranking: if you want to go onto a PhD, your application will mostly depend on the letter of your research advisor. 

That being said, there are terrible warning signs, and I would not take that position. Requiring you to work on sundays (and saturdays I presume) does not make a healthy student. Even students need down times. Sure, when I was writing my thesis I worked for a month straight; but thats crunch time. During normal students life it should be fairly balanced (40-60 hours a week working, with some play). 

If you are willing to pay (another topic) go to the higher ranking schools, or wait a year and reapply to see if you can get funding at a better school. The advisor at the lower ranking school seems unethical, and I would not work for him even if he was at a school like MIT or Caltech. The fact that he wouldn't write you a letter of recommendation if you decided to leave is truly an indication that he does not have your best interests in mind: writing letters his his job. 

As so many put it here, run don't walk.