Rob, I do many 203k loans in Long Island and NYC area. I can tell you that I have a deal right now, were the bank is giving the buyer a credit for the damages caused in the storm. Banks will almost never do repairs, they are simply trying to sell the house in as-is condition, not make any repairs. If I were you I would look for some sort of credit, if they're even willing to do that.
On the flip side, you're not obligated to purchase the house being that the condition of it is not as it was when you initially saw it. But you should discuss it with your attorney. Depending on how the contract is drawned, you very well might be able to walk!