DonaldB

I'll do that first thing tomorrow. It's been an emotional day for us but we will never give up. I'm currently planning a month long vacation over there and we might look into doing a marriage based visa instead. 

Oh wow... so they're actually returning it to USCIS. They must have seen something deficient in the application maybe? I would use that link they put at the bottom of the letter to contact the immigrant visa unit to ask why it was refused and being returned to USCIS. 

St. Luke's is pretty accommodating... As long as her SLEC appointment confirmation page, passport and DS-160 confirmation page match on the name, I really don't see them giving her a problem. NVC left off Jaycel's middle name on the K1-FTP letter and there was no issue. Let us know if that's not the case. As you said, nothing you can really do about it now that the embassy has the case.

In that case, I think you'll be just fine.  Are you currently working?  Even if your income was temporarily lower last year due to medical/time off,  current income (as evidenced by payslips) will be more important than last year's tax return info.
 
I get the feeling that Manila is pretty lenient as well.

What SalishSea said, but also, you can include assets too, so remember to do that. With even a moderate savings account, and no recent history of using government assistance, that should easily be high enough.

You will be fine.  The 125%/I-865 comes into play much later in the K-1 process (probably >one year from now).

The lawyer is correct. You have to count any minor children regardless of whether they live with you or if you claim them on taxes or not. Your household size would be 4. 

Sorry I accidentally hit send while typing my messages lol