Important question - is it a legit school? And, are you actually on a visa with them, as against through someone else, and you just work with them?? Is it a big school, or just a small private deal?

To answer your question - what miracle are you and the other teachers expecting to happen such that you will all get your money back?

Find a new job, leave, give up hope of being repaid, unless you can come up with some way to threaten them with something they can't either ignore, or counter. After all, it's been categorically proven to them that they can continually take your money with no negative consequences. Don't expect an overnight change of heart will get your money back.

At the very least, go post your problem - WITH the school's name and location - on one of the ESL forums so that other people know about it, and don't fall into the same problem.

first make sure all your communication with them is through email so you have documentation of the problem, 
2 find another job
3 contact the local psb (some say they help) but in the end this is china they love to lie and cheat here. and when it comes to foreigners the entire country will close ranks against you because are a foreigner.
some people call me racist for saying this, even though i attribute it to growing up here and the environment 
but hey you are not the first to get the real china experience nor will you be the last

bottomline you will never get the money you are owed, be prepared to have to leave the country , becasuse the guy probably wont even be willing to give you a release letter
but i'm a racist for speaking the truth oh well

If they've so clearly broken the contract, is it possible to leave to another school without too much issue ?

Shit. Going to Hong Kong is really, really not attractive, ATM.

Since you are in Dalian, I think I actually can guess what school you are at.  Just tell the woman that you are leaving and that you demand final payment or you will report her to the authorities.  (That won't actually do anything, but at least it sounds good.)

In the mean time, go to a website (http://www.dalianxpat.com) and talk to the folks there.  Lots of teachers that can tell you what to do and where to go to find a decent job that won't treat you too badly.

Best of luck to you.

Take the advice of the wise ones above, get out of there. Your visa should still be good, it's your expert certificate that is attached specifically to the supposed school. I know a number of teachers that for one reason or another left a place of employment and they all kept their visa and got jobs elsewhere. But check with the local expats in Dalian, someone might have had a similar experience and know who you can go to.
But you ain't getting paid that's for sure, bail out before its to late, and go work for a decent school. A decent school will probably understand what happened and not worry about the release letter.In any case you have nothing to lose, you either work for nothing or do nothing and still get paid nothing.

I hear the Rocky music in my head.

I'm getting ready to bust out -- very, very soon. Never left a school before ..

There's a government for each province in China; if you break a Z Visa the government of the province you work in will take note and may refuse you another work related VISA in the next years (but you can still try, nothing's sure). But Visa for studies should be fine (X Visa).
In terms of work, the school you worked for will take revenge, not letting you use your Foreign Expert Certificate for another Z Visa job, so you might not be able to get another Z Visa in the near future anywhere in China, although eventually things will sort out one way or another; like you can get a job on a Business VISA or let your new employer put pressure on your old school for them to eventually release your Foreign Exp Cert to them.
I even heard that a whole new Foreign Expert Certificate can be made, but that depends on the local government and how good the schools’ relations with that local gov are.
Take note that there are 2 kinds of Certs in China: Foreign Exp Certificate for all education related jobs, and Scientific Expert Cert (not sure the exact name) for other jobs.
Worth knowing that you’ll probably never see your cert; it’s the property of your employer, who passes it on to your next employer.
The Foreign Exp Cert has an expiry date on it, but even after expiration you still need a release from the last employer who has it to get your next Z Visa job.
In the end, it’s just loads of red tape (bureaucracy); and where employers and governments like you and get along well together things become very easy.
However when you break a contract you burn bridges, make relationships bad, and that’s what you don’t want in China.
If you break a Z Visa contract, change province, and eventually start working on a Business VISA that doesn’t tie you down, cos F Visas (business) can be broken without future consequences I think.
However, regarding the Chinese gov and it's VISA Bureau the F Visa is not proven work experience, because F Visa is not official employment; only Z Visa is.

I am guessing you missed the warning signs, first off you should never need to pay for your visa. That is a biggie, usually if you do need to pay for your visa you have an F visa and not a Z visa.

Second the rest of the teacher are bitching about not being paid, another biggie, if they are not paying the other teachers what makes you think they will pay you?

Cut your loses and high tail it out of there, take ExpatJohns advice and find some good work at a good school.

I may be a little bit familiar with this incident.  If the school has not paid the foreign teacher and is making no effort to pay the foreign teacher, then the foreign teacher should contact the Dalian Foreign Experts Bureau.  It is a condition of every contract in China that the foreign teacher be paid and be paid reasonably on time.  It is the one condition for irremediably abrogating a contract -- particularly on their end.  Why oh why would anyone put up with such conditions, particularly in Dalian where the job market is strong?

Tell them they have 24 hrs to arrange the money or you will leave the school and go to the PSB, you have a visa that they have arranged for you so if they are doing that illegally also they will be a little afraid. If they say that by doing this you will get in trouble with the police also, tell them that you will just pretend to be the poor foreigner who got screwed over and that you don't care if you are sent back to your own country. This has worked for me in the past!

Damn, I feel for ya Adrian. "Nightmare" schools are very common here and in South Korea. (Based on what I've read and been told,personal experiences,etc.) * Follow the advice given to you here by fellow foreign expats!

Good luck

Adrian, I see that you are still around on this Board and on other Boards.  Somehow, somehow, I thought that I heard that your situation had worked itself out.  Was this the case?  Were all things resolved amicably and have you remained in Dalian with this school?  All the best.