MarkB
Legend
I think the key thing to remember is this was a novice DM, new to this. "Crashing" the game is quite likely to deter this person from wanting to DM again.
I think your initial solution, calling a time-out, talking to the DM and suggesting alternatives as a group of people playing the game to have fun is the better path than resorting to "crashing" the game. As others have suggested, maybe talking it out and giving the DM a chance to use some basic stats for the paladins or pointing him to a template he could use for it would be much more helpful than "crashing" the session. Then the DM gets to learn and possibly get over this hurdle and become a great DM in the future.
I think one problem here is that the window of opportunity for such intervention can often be small or non-existent. With an inexperienced DM, the time period between the players realising that the DM doesn't actually have a response planned for their current course of action, and the DM deciding to call it quits because he can't see a way out, may only be a few minutes - or even no time at all.
And once a DM - especially one with low self-confidence - has made that mental jump off the precipice and decided not to continue the game, getting him back in the mood to run it may simply not be possible, at least for that session. Conciliation can seem like condescension, and suggestions from more experienced players can feel like them dictating the way the game should run.