Best of luck!
1. The offer sounds good if it is within the range of the original short sale approval
2. Cash back does not have to be an issue particularly if the bank is able to net what they approved in the first place.
4. With respect to your offer, get the seller to commit by signing your offer subject to their lender approval. Allowing your offer to be pooled with a bunch of other offers is not a good idea. You may wait for an extended period of time and in the end lose out on the property altogether.
I don't feel the cash back is an issue, the bank just looks at the net number. You sound like a really strong buyer and they should jump at it, but keep those options open is my major recommendation.
1, First there is no why for us to know without knowing the address and the price you offered to see if it will have issues with appraiser.
2, I personally think if it can appraise, it should not be an issue. I have not had a problem asking for money towards closing cost most of the time
3, Brace yourself for a whole lota patience because BofA has yet to show they can move fast on any of these transactions. They seem to be notiously slow and that is all I can say about them and still be nice,
4, Are there mulitiple offers in front of the bank? Most agents submit only 1, so no worries there unless listing agent submitted more than one.