Hello and welcome to the forum!
I'm sorry you had a bad experience. A few things to put into perspective...
For one, most of what the docs told you is actually acurate. When they told you it would take about 2 weeks to "feel the effects", that's typical. It can take 4-6 weeks (sometimes longer) for a person to start noticing the therapeutic effects of these kinds of meds. There are also commonly initial side effects, which start to resolve after about 2 weeks, and those side effects are consistent with what you described.
The only thing the doctor could have done better was to slowly increase your dose over time to minimize the severity of the side effects. You were Rx'd a high dose which only made the side effects much worse and intolerable. There is no steadafst rule that a person HAS to be started on a low dose, but that's common practice and most people tolerate the meds much better this way.
This is why I always suggest, if possible, that a person seek out the help of a psychiatrist when it comes to medications. They typically are better educated about these disorders and the meds, and they work with them daily.
You did the right thing by seeking help with the side effects and returning to your doctor. It was also wise to ask to see the other doctor. It seems that the Xanax may be enough for you. If it works for you, that's the important thing.
If you can...ask for a referral to a psychiatrist who can manage your meds better. Chances are he/she will just keep you in the low dose of Xanax if it is successful for you.
Hang in there..let us know how you're doing!
I would find a new doctor. These are the MAIN side effects for Paxil: Anxiety; blurred vision; constipation; decreased sexual desire or ability; diarrhea; dizziness; drowsiness; dry mouth; gas; increased sweating; increased urination; loss of appetite; nausea; nervousness; numbness or tingling of the skin; stomach upset; trouble concentrating; trouble sleeping; weakness; yawning. This doesn't include the "severe" side effects or the ones the FDA hasn't listed yet. Also, 40 mg is the highest level available, Paxil starts in a 10 mg form. Plus, in my opinion (and it is just my opinion) there are other drugs available that are better suited for the control of anxiety. That's my two cents, not that you asked for it. Good luck.