Terms agreed upon for PhD offer are being unilaterally rescinded—what to do?
It may have been mistakes and over-optimism, not deliberate misleading, on the part of your advisor and the dean. If so, they should be feeling embarrassed at making promises they could not keep.

The contractor plan does not help with your goal of "Doing research and earning a PhD.". At most, it is a temporary stopgap, but accepting it may weaken your negotiating position when trying to get what you really need. You need to move to a university, possibly your old one, as a PhD student, not a contractor.

I suggest asking your advisor and the dean for help finding a PhD student position, including writing letters of recommendation and calling associates. That is the best way of compensating you for their unfulfilled promises. Give them something to do that is within their power, unlike keeping their original promises, but that will help you to your real objective, unlike the contractor offer.

Here is a way to get that discussion going:


  Thanks for the offer of a contractor position. Unfortunately, that
  does not let me achieve my objective of research leading to a PhD. It
  does not seem that I will be able to do that here. Could you help me
  with finding a PhD position elsewhere? Do you know other researchers
  in [your area]? Could you make some phone calls to find out who
  can take me?


Before doing this, you also need to compare your situation if you continue as a PhD student with your current advisor to not having a PhD student position.

You might also review your advisor's and the dean's known contacts, such as their co-authors, advisors, former students, and people who had the same advisor at about the same time. If you can, identify professors on that list who you would like as advisor. That way you can specifically ask them to contact Professors X, Y, and Z about you.

If they do start helping you with your position search, remember to thank them, even if you feel they owe it to you. Always give positive reinforcement to behavior that benefits you. That will encourage them to go further down that line.