It sounds like the lack of understanding is a result of your lender's lack of familiarity with a short sale. It sounds like they are assuming that a short sale is no different than a typical real estate transaction, but in reality the house is sold "as-is".

Under a typical transaction the seller would be obligated to address the septic issue, but with a short sale, the seller has no money available for that.

Evidently, you are convinced the house is priced right even taking the cost of the new septic system into consideration. You didn't mention an appraisal issue so the only problem appears to be the lenders lack of understanding, which is simply because they don't handle short sales, they handle mortgages.

If you are convinced the property is a good value, you're confident in your cost estimates in relation to the new septic, and your lender will move forward with your mortgage, you should be OK.