The bacteria is not a big deal. Have the seller treat it and have it retested. It's not like the well has chemical pollutants. I would not go with city/rural water. If you really want the place, don't get bent out of shape on a relatively minor detail.
In my opinion, you have the sellers over the barrel. They want to sell the house and cash out to split up the cash between family members. They have a buyer right now, and probably would like the cash in hand, rather than deal w. trying to find another buyer. As Rancid mentioned, they will now have to correct the problem whether they sell it to you or not, so I'm sure they would be more than willing to fix the problem. Not sure if they would want to run rural water there, but if they are not informed very well about how to fix the problem, they might just agree. I had to put a roof on my old house as a concession to the seller. I did it because I had a buyer!
Okay... after hearing from some of the wise sages, here's what I think I would do. I'd negotiate splitting the cost of public water installation with the seller. That seems like the fair thing since the well-water supply can be easily fixed for a few bucks. It just doesn't seem right to take advantage of people when you know the problem isn't serious. If I chose to keep the well-water, I'd negotiate the price of the filtration system. If I used both, I would consider separating the well water from the house water and use it for garden, grass, car washing etc... Whatever direction you choose, don't lie or present an inflated repair estimate to get an advantage on them. The man you look at in the mirror each morning may not respect you for that.
