We don't know the owner's situation so it's not fair to pass judgement. They may very well have entered the rental agreement with the intention of cheating their renters. Or they may be in a position where they are unable to answer the renter's emails and phone calls. I'm going to go with the assumption that the owner went into the rental situation needing the money more than they needed the points. Finances may have gotten out of hand for them and paying a
DVC loan went to the bottom of the list of priorities. And at this point, they have no way of refunding the renters and have no answer for them other than "I'm sorry", so they have elected to just ignore both DVC and their renter. I've seen it happen time and time again with people who are in over their heads.
None of this helps the OP who is now out $500+ plus the points that they didn't want to use for this stay. It sucks, no two ways about it. I hope that there weren't other renters who are about to find out that they have no accommodations for their planned vacations.