I'm in a situation that's slightly more complicated than the average sale and need some advice.  I'm in escrow to sell a duplex in Pasadena, CA.  Included in the sale is a set of approved building plans for a 5 unit condo.  The property was listed with plans that were "pending plan check approval", the situation was fully disclosed under contract, buyer was aware that the plans were subject to corrections from the City, and a set of the submitted plans were provided to the buyer.  Buyer's offer was "all cash" and all contingencies have been removed.

In the corrections, the City asked for some changes (as expected), such as calling for a higher spec roofing material.  The buyer is now holding up closing and is asking for another price reduction.  (On a relevant note, our architects were able to design more SF in the final plan than what was originally presented to the buyer; the profits from the additional SF should more than cover the increased costs from the City's spec changes.)

My questions are:

1. Does the buyer have grounds to withhold closing?  In our contract, the language was "3 days after delivery of approved plans"... this was achieved 3 weeks ago.
2. How should the buyer's deposit be treated if we pursue cancellation?  Do both parties must agree before we can confiscate the deposit?  Since the buyer won't agree to this, does that mean we essentially can't touch any portion of their deposit?
3. Can we unilaterally cancel the contract and escrow if we give the buyer their full deposit?
4. What is the fastest timeline for cancellation (from notice to when we can relist the property and accept new offers)?  Notice to Perform + 3 days... what steps follow and how much time do they take?

Thank you in advance!