Long story that I will try to summarize...
I paid a good faith deposit ($425) to my roommate. I was not on the lease. We had a written but unsigned (emailed) agreement regarding our arrangement.

The relationship has dissolved. She is holding my deposit - even though I paid all rent and utilities on time and there were no damages. She is also now deducting utilities. Whatever, I just want as much back as possible.

I had to move all of my belongings, clean and steam clean the entire townhouse and completely vacate the property. Because I was responsible for 90% of the cleaning, I also moved some of her belongings since she moved 12 hours away. She breached her lease. This doesn't really affect me since I wasn't on the lease but I was trying to help the landlords to be able to rent the property more quickly and she could get her belongings from me whenever.

Our relationship has gotten progressively worse. She promises my money and then doesn't deliver. She changes her stories. There are bounced check notices in the mailbox - I don't think the utilities were even paid because the landlord told me the water was turned off.

I have the cable box and now she's threatening me since the cable company is charging her for it. I would love to return it if I trusted that she would still pay me, but at this point I feel like it's my only leveraging device.

HELP! Does she have legal recourse against me for holding her property? Do I have any recourse for collecting even the balance of my deposit? We lived in NC and she moved to MI.

It will be very difficult for her to do anything while she is in a different state and also because it sounds like she doesn't have a dime.

All you can do at this point is sue her in small claims in NC. Very little chance of collecting, though.

NC magistrate says I will have to file in Michigan - is that true?

They can't serve someone who isn't in their jurisdiction. Sounds right. Doesn't sound like she has anything for you to collect, though.

So I should keep her belongings and eventually try to recoup some of my monies? I don't want to do anything illegal.

Also, I forgot to add that the landlords originally offered to pay me out of the ex roommates' deposit. Would they face any legal recourse if they paid me and took possession of her belongings?

I would stay out of her relationship with the landlord. That was one contract and yours with hers is another.

I would also charge her a "storage fee" for keeping her stuff. You were under no obligation to keep her stuff safe.

Does she have family you can negotiate with?

I don't know about her family. I'm 31, and although she's acting as if she's 13 she is 33. I have tried every means to resolve this situation amicably, but her inability to communicate has made it extremely difficult. Her last email to me implies that I took her belongings without her permission even though I have 3 emails to the contrary. I should mention that I have requested she pay me in cash in order to receive her property back (after I became aware of the bounced check notices). As I stated, I just don't want to do anything illegal. I feel badly for her, but I just want my money and to be able to move on.

US Postal Money orders are just as good as cash and easier to mail. As you describe it, she sounds like she has nothing to pay you with.