The main reason they dropped the appeal was that even if they won and the FIA voided the results, Max still wins the championship. So no point in pursuing.
Hamilton is probably wrestling with the decision to come back because of the huge unknown with the rule changes. He will either dominate or struggle depending on whether Mercedes nails the initial build or not. After all the drama it’s probably a tough decision. You can come back with all the anger and motivation in the world and be forced to drive a shit car all season. That would truly suck balls.