With the short sale, you almost have to call every single day to make sure things are moving along; and once they accept your offer in writng, they want you to close quickly.
I would go ahead and continue to look for other properties while this is still going on.
If it comes through and you still want the property , great. If not, and if you are protected by a short sale addendum saying that the contract is really not in place unless there is a lender written approval by a prescribed time frame and the lender approved within that certain time period (which does not seem possible from what I read), then you should be able to cancel the contract and go on with the new house you found.
Either way, read your contract carefully to make sure you can get out without losing anything before procedding - eveything is in the fine print. .