If a PhD student is working slowly on a project, is it bad form to give the project to another student? I think my advisor may have done this to me.  Initially he hired a master's student to "help me" with the project and he told me I would be supervising him.  But now he wants the master's student to work on core parts of the project, and he says that since I will be busy this summer, the master's student might be the primary person working on the project.

I am thinking of quitting the project because it looks like I am being replaced.  Am I overreacting here?
"Being replaced" is not a good reason to quit.  Quit if you cannot perform your responsibilities.  Otherwise try to perform them.