Green card issue

[naheeds03]

I'm a LPR(Lawful Permanent Reident) living in the states since1988 when my green card was first issued to me,at that time I was only 2 years old so the green card was in posession of my parents. I've never travelled outside of the States since than untill last year in April 2005 to Canada(had no problem getting into Canada) where I stayed for 10 days on my way back at the Peace bridge border I was stopped for an hour by a customs officer and my green card was mutilated (cut in the top right corner)beacuse my picture on the green card was of when I was two years old and that the version of the green card I had was the old one according to him and it had expired(even though the old green card has no expiration date on it).The customs officer gave me a Replacement green card form and told me that I'd have to get the new green card and also if i was to leave the states again and tried to come back in I'd have a problem! Obviously I was furious and also a little confused. My question is since I've been a LPR for so many years can I apply for citizenship with my old green card and I have copies from before it was mutilated and submit one of those copies along with my application for citizenship and/or Naturalization? If not when I apply for the new green card can they deny my application based on the reasons why didn't I apply for the new green card much earlier soon after I had turned 14 and because the picture is such a old one of me? I never applied for the new green card because I never thought I'd have to replace the one I already had and never travelled so never needed it. If anyone who is experienced in this case or has had the same situation ,cna you please help? Any feedback is helpful! Thank You