Reading your post I see you are dying to buy this house. Why? What is so special about this particular house?
Why is the h/o selling? His answer can be a key (and you must be cynical!)
The inspector warns you about problems, but you think he is conning you.
7 other people have withdrawn offers because of "financing". That is the cleanest way to back out. Its easy to "not get financing". And, that is what the owner (or his agent) is telling you. Why are you so eager to believe them?
You say the house is 'solid', yet it has dry rot in one corner and 'spongy floors' elsewhere.
The powdering cement: It could be simple efforvesence (where the salts are leeching out) or bad concrete. The efforvesence is no big deal. Bad concrete is. I can't tell what it is from here. What does the inspector think?
While all houses have their problems, those problems are not this severe.