When I give tours of the Museum I always highlight the sword and its meaning. George III asked what Washington would do after we had won the war, and after he was told that Washington intended to surrender his commission, go home, and be a farmer, ol' George said "If he does that, he will be the greatest man in the world." Willingly surrendering power was just not done at that time. And of course, Washington did it not once, but twice, when he decided not to run for President for a third term.
But yes, Washington likely would have been appalled at the statue. He was always very conscious of how he presented himself and maintaining his dignity. Democracies at that time did not have the greatest reputation, and most Europeans thought it meant mob rule. So being President of a Democracy, Washington was rather keen to always appear modest, but dignified. Not royalty, but not part of a rabble either.
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