re: Home Buying Question, able to walk away?

Don't worry about whether or not the sellers are pissed. The had a written offer before but chose not to sign it. That is part of the risk that they took with a counter-offer.

I assume your original offer expired already. They are usually written to terminate if not accepted in a short time frame (day or two). But you should check anyway. Worst case they would argue about the right to accept your original offer and keep your earnest money. It wouldn't be worth their while to fight that battle.