I've also had some sellers on some deals in NYC demand that my partners and I (the potential buyers) order our inspection and appraisal before submitting our offer. I told them to take a hike, and to either take it or leave it. Some backed down, and others walked.
But is it legal or ethical for an agent to say "no sale" until the appraiser does an appraisal? Only a lawyer can answer the legal aspect, but--sure. If the agent is reflecting his client's wishes, of course. And if the offer contains a financing contingency, absolutely yes.
Ultimately, though, it's not for the agent to say. The buyers make an offer and the seller makes the decision whether or not to accept.
I'm not sure I understand your question, but if a contract is not complete in every regard, you do not have a contract. Allowing an appraisal or inspection when there are outstanding unresolved issues is getting things in the wrong order. While it may be advantageous to a listing agent to permit an appraisal to happen at no expense to his client, they are doing their job to get the details ironed out before you spend your money on an appraisal.