Even a sales contract with FHA financing almost certainly has a limit to the dollar amount of repairs that a seller is obligated to make. And certainly every contract SHOULD have such a clause. The seller should check his contract, read it and see what it says. If he gets an expensive quote to remedy the paint situation that's over the limit, he has an out.
It's simply not the case that if you have an FHA buyer the seller is on the hook to fix anything and everything just because some FHA inspector requires.
Also, from a practical standpoint, if he offers to return the sellers deposit in full and call it quits, there is a good chance the seller will walk. Their alternative, to suit for specific performance, while their deposit money is sitting in escrow, is not a particularly good option.