Wow. I'm not really sure what was meant by "unique property." I honestly have not come across that situation. If I had been your agent, I would have immediately involved my broker of record for her guidance and advice. I also don't understand why because you choose not to sign an extension you are at fault for the sale not occurring. I'm not an attorney or a broker, but I lean toward Sharon on this in that the house did not appraise. Although I am neither an attorney or a broker. That's just my feeling on it with the information I have.
I understand your feelings on mediation, however you are bound by the contract you signed. If you don't then you will be breaching that term in the contract. Your agent should have better explained the mediation clause to you so that you could've opted out.
I understand your friend is helping you and that you don't have more money to shell out for an attorney. That was part of the reason mediation was created and added into the agreement of sale. It is a way for you to try to resolve your issue with the seller out of court and without out an attorney if you choose. It isn't binding, so if you do not like the outcome you can go forth with legal actions. I know it hurts, but you should give mediation a try. The seller will not have a change of heart and decide to release your deposit money. You are correct in that it may take a while to get another contract or worse he could decide not to sell.
It sounds like your options are:
1) offer the seller to split the deposit in half with you and be done.
2) go to mediation where you may come to a resolution.
3) wait it out like your attorney has suggested.
4) try to find a way to move forward with the sale either by challenging the appraisal if you can or with another kind of loan.
I don't know all the details to how your agent acted or didn't act on your behalf, however it does sound like further investigation should be taken. If your agent acted inappropriately, more than likely it was a violation of the Realtor code of ethics and not necessarily PA licensing law. Below are links to both the PA Assoc. of Realtors ethics complaints section of their website and the PA Dept. of State Bureau of Occupational Affairs complaints page. Before you lodge a complaint, review the code of ethics (linked on the site in blue) and then make another effort to speak with your agent's broker of record. He or she is responsible for your agent's actions or inactions. Since your agent is unwilling to step up and push on your behalf, then maybe the broker will, or at least explain to you in greater detail why the seller has a right to your deposit money if any. Who knows, the broker may even have their attorney step in and help you out. Remember though, you always catch more flies with honey than vinegar. Tread lightly and politely even though you are probably raging mad.