Overheard my GF tell her friend that I have a small penis

Have a frank conversation with her about it. Tell her what you heard her say and that you find it utterly disrespectful and offensive. Be confident about it. Tell her that you would never say anything to disrespect her to any of your friends even though there are things about her that may be less than desirable. Don't list them even if she begs or challenges you to. Leave her guessing. She knows what they are, maybe even more than you do.

Then break up. Tell her that you have enough self respect that you cannot continue your relationship with someone so disrespectful to you. Let her know that you value trust in a relationship because you yourself are trustworthy, but that you don't see how you can trust her now. End it then and there and walk out. She needs to hear it and you need to do it to regain respect for yourself. You'll feel like a new man and will be able to hold your head up! If she begs and pleads, don't give in or take her back. You've got to be true with yourself ... she is not going to change.