What did your attorney say? On your P&S, if it is the Standard Berkshire County P&S, there is a section that says if the Title V does not pass by a certain date, the buyer has a right to back out of the agreement and get deposits returned. However, the buyer must exercise the right to back out, or else they are saying "OK, I know it failed, and I am willing to take it that way anyway." Did you renegotiate with the seller when the Title V failed? What did the two of you agree to, and DID YOU PUT IT IN WRITING? A buyer agent would have kept on top of this and made sure that the end result was acceptable to you.
As stated by another respondant, the seller is NOT obligated to correct the problem unless the two of you agreed that he would to keep the sale going. The problem must be corrected within tow years of failing, so it could end up being entirely the buyer's responsibility. It sounds like the seller was willing to cover half the cost of correcting the septic issue, which is better than he was required to do.
Lesson learned here is always use a buyers agent. The Title V regulation does not indicate whether the buyer or seller is responsible for providing the Title V certificate . As it is traditionally the sellers responsibility we always include that language in the offer.
Hopefully your attorney can help you out.
Hope that helps, check back and let me know how you made out,