I say kudos for having the courage to make such a difficult decision. But in essence, you let the cousin "win" by bowing out. If you really love her, I would think you'd keep banging home the point. Since her parents agree, couldn't you do some kind of "intervention" to get her to see the light of day?
Update: Apparently she's concerned he'll kill himself if she kicks him out. Yeah, real nice racket he's got going on there, huh? I maintain that I visit with his Daddy would clear up this "depression" real quick. (I mean REALLY, what does this dickwad have to be depressed about?! He gets free room and board and gets to play Playstation all day. Sounds like a pretty damn good setup to me.) Oh yeah, and I'm such a tool, I took her back.
I've spent the whole thread hoping you guys would work it out. It sounds incredibly frustrating, but it's not a good enough reason to blow off true love. Glad to hear you're giving it another go. Feel free to share the following Bob Dylan quote (from the hilarious "Advice for Geraldine on her Miscellaneous Birthday," link below) with her: "be suspicious of people who say that if you are not nice t' them, they will commit suicide." http://www.slopbucket.com/bob/tbob/writtenword/geraldin.html