Hi Lucy:
You're right, you should be comfortable and painfree, having been that way for a while before anyone starts phase II. You say yourself you've only seen minimal results so far in phase I. That sounds to me like you're no way ready to move to phase II. I wonder if the dentist doesn't know what to do next, since you've seen minimal results, and that's why he's rushing to move to phase II.
It's common that once you start wearing a splint when you're not wearing your teeth don't fit anymore. Like Saaraah mentioned (hi Saaraah!), phase II can involve orthodontics or restorative work to the teeth (e.g. crowns). Or a permanent splint. Not everyone wants their teeth adjusted.
I have to wonder why he is so quick to file your teeth down. Just remember that whatever you do, YOU are the one who'll have to live with the consequences, not the dentist. If you feel you've seen minimal improvement with the splint so far, maybe you and the dentist need to work on getting that right before you do anything else. You might also want to get a second opinion. It can't hurt (okay, it might hurt your pocketbook
Good luck with your surgery next week. Be sure that they're clear on your TMJ problems. You might want to talk to your doctor or surgeon about this beforehand and see if there's something they can do to avoid causing your joints a lot of stress.
Take care.