Ты его колбасой кверху держишь, а его надо колбасой на язык класть. You hold it with the sausage upwards, but it should be placed with the sausage on the tongue. Колбасой - кем\чем? with what? instrumental case is used here. Yes, его here is бутерброд. http://www.russianlessons.net/grammar/nouns_instrumental.php

Leonid is correct - его refers to бутерброд, and the instrumental колбасой here is for 'in the manner of'. Here are some expressions for you: - вверх ногами (upside down) - вниз головой (upside down) - вперёд ногами (=six feet under, dead) - козырьком назад - wearing cap backward So, it is not uncommon to use the Instrumental for in what the manner this or that is done.