I've made & canceled several 5000 point redemptions in the past couple of weeks, and in every case, ALL the points have returned to my account within minutes after the cancellation. I didn't book via the pointbreaks link, but simply through doing a regular award room search. The T&C in that case says nothing about a penalty for cancellation, so I would definitely have had contacted Priority Club if indeed there was a penalty charged.
It seems that if you link to a hotel from the Points Break site and make your booking, it may be subject to the 5K cancellation caveat. However, if you start off in the normal booking/search fashion and book a hotel showing 5K, it is treated like any regular award booking and points seem to be fully refunded.
The T&C for Point Breaks do specify one night non-refundable, but the online system doesn't always treat it this way.