Dear Steve and Kathy
I'm so sorry to hear of your troubles. But this is a fairly easy one. The 5 the inspector came up with should be 5 on the Tramex Concrete Moisture Encounter meter. It's a small hand held meter that has probes that are is pressed to the concrete floor. The highest reading allowed for wood is 4 1/2. And if a reading over 4 is detected many more readings should be done, in the wettest season you have. Oh, of course that needs to be done BEFORE they even consider selling you any type of wood floor.
Along with this test they could have done a Calcium Chloride moisture emissions test. This test is a little more tricky, but basically it involves taping down a bubble container to the floor with a sample of pre-measured Calcium Chloride in the bubble. After a certain length of time this sample is sent back to the testing company, and they send back the results. A 4 in this case is the maximum pounds per 1000 square feet over 24 hours, allowed for wood floor installation. This is a better test.
So you see in either case you have exceeded the maximum, and hence the bad result. The solution is clear, remove all the hardwood ( you didn't say of this was solid wood or engineered) clean up the subfloor. And install carpet. You can never have a hardwood floor in that present situation. Don't be too alarmed by the high readings, all concrete floor emit some moisture, it's just too high for wood and all vinyl products.
Now if you are going to ask me, who is to blame. Well, after 3 court cases, (the last one is described in the Wrong Way Floor in the Case in Point section) I would believe that it is up to the flooring contractor to determine what wood floor, and what method of installation is best in your situation. It is always up to the expert to do all tests, and if they did not they will be responsible for returning to the point at which this all began. Plus maybe punitive damages, and costs of the inconvenience of the first job. And the cost of moving out while they remove and CLEAN the concrete, install new carpet, and you restore your life. Please don't be sick, just get this sorted, I'm sure a large (at least they sound large) company is not will to risk bad publicity even on a job this size.
Read my article on wood floors on concrete. It deals with all these problems, moisture, leveling, and picking the right installation method.