It's not right, but it is a short sale. In a short sale, anything can happen. I don't know you, but most buyers who offer to buy a short sale assume that everything will go well and they will buy a property in slightly over regular time, but for well below market value.
In reality these rarely go according to plan and in the best cases, they take too long, there are complications along the way and "stuff" happens.
I'm sorry for your situation, and I'm not opposed to you pursuing what may be valid complaints. I just wish more buyers had a realistic view of what they are getting into with short sales.
Here's what I see. The bank is not directly involved, they don't own the home. The seller owns the home, but is in financial hardship or they wouldn't be doing a short sale. You can sue them, but odds are they don't have much in the way of attachable assets. The seller's agent doesn't own the home and if they have a written property management agreement you can access, the owners may have a claim against them, since they hired them, but you may have to sue the owners, who may have to sue the agent to collect any money.
Through this whole process, I see you out of pocket money for legal fees, headaches and trouble and the only one coming out ahead is the attorneys. I could be wrong, but again, ask an attorney.
The homeowner is responsible for the property but they gave it back to the bank. If the bank doesn't fix it for you, they'll have to fix it for the next buyer, so they might as well fix it for you. Work it out instead of starting a ridiculous fight you'll never win. The banks insurance company probably covers it.
Short sales and foreclosures are sold at a discount for a reason. I have yet to see a home that was special or cheap enough to justify the risk or aggravation involved with these types of transactions. YOU assumed this risk voluntarily and on your own when you opted to purchase a short sale. It didn't work out for you. There are TONS of dumpy houses on the market that you can buy, and deal with the homeowner instead of a bank. Buy one of those instead.