Yes, but fixable.
How?
Appeal the willful misconduct determination, and you will get a Hearing before a Referee. Win that hearing and 1) you will get a retroactive payment of all benefits due to you since you were initially denied; 2) you automatically win the overpayment issue, since any benefits you were previously paid were appropriate.
CAUTION: You get only one bite at the apple. If you lose the Unemployment Hearing before the Referee, in nearly every case you will lose when you appeal that decision to the Unemployment Compensation Board of Review. Why? The Board of Review only considers the record (the testimony and exhibits) created before the Referee. You cannot "supplement the record" with new evidence; you do not get a new hearing.
This is why, given all that is at stake, it is a good idea to consider hiring an attorney to help you with the Referee Hearing.
John A. Gallagher, Paoli, PA (15 miles west of Philadelphia), 610-647-5027, http://www.johnagallagher.com/
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