You're not failing!! I know how frustrating it can be, but my best advice to you is to take a deep breath and relax! It's really common for babies' appetites and preferences to vary a lot from day to day because of teething, illness, or who knows what. Because he's still so young, formula should still be his main source of nutrition for several more months. Solids are only for practice and nutritional supplementation, so if he decides to take a break from solids for a few days, that's okay. As long as you don't try to force the issue or make mealtimes into a battle, he'll come back around when he's ready. New tastes and textures, like veggies, can throw a wrench in things sometimes. Have you tried mixing them with something he does like? You can gradually increase the proportion of veggies you mix in as he gets used to them. It may take some time, but that's okay...there's no rush!
As for the amount of cereal, it really depends. Cereal can be pretty constipating and filling, so if he's still pooping okay and taking 26-32 oz of formula per day, then 1/4 cup is probably about right for him. Good luck, and let us know how it goes!