[RIP]

Yes, loosening the bleeder valve will let you retract the piston. No you'll only have to bleed that caliper, not the whole system. That still leaves the primary question unanswered. Why won't it retract?

Tried to find the thread but can't. I recall someone running into a simular situation and if I recall correctly it was the flexible brake line that connects to the caliper. Apparently they can fail internally and act as a check valve, not allowing fluid flow. Might try flexing it more than you have been while applying pressure on the piston.