I would have your agent talk to the listing agent that the offer was presented. The 12/31/10 date for the banks decision does not seem out of line for a short sale. With short sales you have to understand that there are two transactions happening: your real estate deal and the owners deal to payoff the bank short.
However, the issue with the property being relisted at a higher price concerns me without you receiving some kind of communication. Not sure from you question if the relisting of the property is with the same agent that had it listed when you made your offer. If with the sale listing agent,then you need to talk to the agent because it does not sound like your offer is going to be accepted by the bank. If the property is now listed with another agent, than it could mean something esle. The property could of gone to foreclosure and now being sold as a reo by the bank.
First Weber Group
Certified Distressed Property Expert