Sara, I know how disappointing it is to think your house is SOLD and it isn't, but if you can, for a minute, put yourself in the buyers shoes. You have an emotional attachment to your house and they don't. When you do out and look for a new house it may become clearer, but you cannot force someone to buy something by holding their money hostage. It makes an adversarial situation even more adversarial. Move on like we do--- "NEXT!".
As a casual observer, it sounds like if you released the earnest money deposit, you could get on with selling your house. Just because your inspector says the home is perfect, well... he is not exactly an unbiased party, is he? If buyers had to use inspectors designated by the sellers, there would be a lot of inspections reporting homes in "perfect condition!" This is off-topic and not really your question though.
On your specific issue - you're paying for an attorney already - follow his advice. It is probably more reliable than asking your question in an online forum where most of the experts are constrained from giving you legal advice on what is at its essence a legal question.
I just want to point out that the fact that it is the BUILDER's inspector makes the report even more biased. Of course the builder is going to furnish a report stating that its construction was faultless! I've never known a builder to do otherwise.
Sorry, Sara, to keep picking on you. I do hope it all works out for you in the end.
(this is not legal advice). if the buyers do an inspection, and they don't want to buy the house, and the have not released their contingencies, then, pending any other significant evidence, I think I would have cut them loose with their earnest money. Having this drag on for two months makes no sense to me.
You can put it back on the market "subject to cancellation of previous escrow" in our MLS. You cannot OPEN a new exscrow until this one is cancelled by all parites in writing.
Focus on selling the house, not the earnest money. Get the buyes to write a letter acknowledging the first inspection was flawed and to agree to take responsibilitiy for it. Any inspection made now becomes a disclosure issue. (you have to tell all the other buyers about it and give them a copy...The good and the bad.