When I traveled through Italy for several weeks we rented four different properties (Venice, Rome, Tuscany, and Umbria) and had rental agreements for all properties.  I was not aware this was unusual.  I do not think I would be comfortable traveling such a distance without a written contract (I would be unlkely to rent any property without a written contract.)   We did pay the balance of our rent, in two instances, in cash on arrival.  But we were not asked for more than the agreed price.

tim22, I hope you are able to work this out. 

Edited to include:  I realize my comment will not help solve the present problem, as the payment appears to have been made and the trip completed (is this so?) but I do think, as someone who re-confirms hotel reservations on route from one destination to another, that a written agreement is a necessary protection.   Is any of your communication regarding your stay in writing?  Again, wishing you the best.

Your best avenue for gaining a refund is continuing to work with Homeaway and hope they can convince the owner to return your funds based on the documentation you have provided.

Are you asking how to protect yourself in the future or how to help yourself now?  I"m confused by your last sentence.

It's not clear how you could protect yourself in the future from an owner that acts unscrupulously.   Perhaps someone in the forum knows of travel insurance that would cover such an event. 

I'm not clear on exactly what happened as you haven't posted the timeline or detail of events: was the 25% for the four months demanded before entering the apartment?  did you pay the entire amount at once?  did you stay for the four months?   If so, did you contact Homeaway or local authorities for assistance during that time?

How did you prepay the rent?  Depending on how much time has passed and method of payment you might be able to get the credit card issuer or financial institution to reverse the payment.  But if four months have passed it may not be possible to take any action.  Action might have been successful if taken immediately. 

A final suggestion for you, write a review of your rental experience detailing the owner's practices  and inform the owner you are preparing to post it.  You could also communicate that you are prepared to post about your experience on every popular travel board (Trip Advisor, Fodors, Frommers, etc).      I would wait on Homeaway to work with the owner before taking these actions, but would have a detailed review ready to post in the event Homeaway is unable to assist you.  The owner may not want to risk your posting a negative review of his/her practices.

Good luck.