Hey Chartley - If you go FHA, I don't think you can cash out... And this seems like it would be the best advice you can take right now to get out of the ARM and avoid PMI on the FHA loan as you seem to have greater than 20% equity. If you refi with FHA at 5% down, your equity position will increase AND you will be in a much better postion to leverage a HELOC. Your FICO will increase as a result of having paid your obligation in full to your current lender... Classic may not be that big a jump but RE Enhanced will certainly represent you as less risk than current.
Take the time over the next couple of months to employ the PFD strategies you read so much about on these boards and others. Dispute inaccuracies religiously and you would be surprised how quickly your FICO health will improve.
I know my response to your question may not be the one you wanted, but trust me HELOC is the best way to get money out of your real estate. And the closing costs on a cash out will prob be more than the cost to completely PFD / PIF your $2500 medical baddies.
Good Luck.
Rob