Bird has publicly stated that Knight's actions (or inactions; he barely acknowledged Bird at all) had nothing to do with his decision to go back home to French Lick. Bloomington was a HUGE city to Bird. Knight has admitted he made a mistake pairing Bird with Jim Wisman, 6'3 guard, as his freshman roommate. Wisman had money and a closet full of clothes. Bird had 2 pairs of jeans, 3 shirts and no money. Wisman told Larry he could borrow any of his shirts he wanted--that would be funny to see 6'9 Bird trying to find one that fit--but that just made Bird more self conscious about his background.
I'm not defending Knight for being a grade A asshole his entire life, but Larry Bird was as tough a sonofabitch that ever played. If he thought a coach would get the best out of him he wouldn't back down to any of his antics. Hell, he loved being coached by Bill freaking Fitch in the NBA. Good luck finding another dozen pros with the same sentiment. Bird went to IU because everyone told him that's where he should go (he initially really wanted to go to Kentucky, but was that recruiting trip left a bad taste in his mouth).