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Met the mediator, told her my version of things. She gave us a list of my wife's demands, the car, household items, a bed, table etc. She also wanted a lump sum to take her off the deed. I put down in the financials that the town assessed the house at $75K, so she wanted half. I offered her $5K. They laughed at my offer, the mediator said. Cluster B wife said my family had all sorts of money and I was a poor spender. My lawyer caught these actions as projection. She said to me my wife  was living in a fantasy  world. Now we each have to get the house assessed by a broker and i have to pay her half. What a witch. I don't have a job to buy her off. I am in intentional peer support training and don't expect to be employed in that field for at least a year. I can't get a home equity loan since I am unemployed. My lawyer says we might contest ownership as I paid for it outright and paid all the taxes, utilities, etc.  My head is spinning. How did I fall in love with this evil person?

I would pursue the fact that you paid for the home outright and she has done nothing monetarily to pay taxes or upkeep in the ensuing years. 

She has nothing to lose and everything to gain.  So of course she is making unfair demands.  Unfortunately, too much in divorce often isn't about fairness.  Usually though the financials are simpler than the custody aspects.  It is doubtful she will settle in mediation.  If there is ever a settlement, it's more likely to be "on the court house steps" just before you have a big hearing or judicial decision.

Your lawyer is right, even though her being on the deed presents an issue, you can present it as a logical thing since you expected the marriage to succeed, that you were largely unaware of the high conflict in her prior marriage (bring any documentation you can find to support her prior conflictual behaviors), and had no idea she would try to villainize you with a trumped up protection order, she never paid anything toward the house or its expenses, she already absconded with a huge chunk of money, vehicle, etc.  Often the judges rule so neither feels they won.  So at worst, hopefully, you'd expect something middle-of-the-road.  You may have to sell the house if the outcome means you hand her some $$$, but probably better to do it by order and not settlement.  It is very likely you will get a better order from the judge than by settlement with an entitled ex.  And try to get the judge to account for the funds & assets she's already grabbed.

After all, it was only a 2 year marriage.

i think lots of us have asked ourselves this question  :'(