I am 5'2" with a 28.5" inseam so a bit smaller than you. Still, the two MTBs I have owned that fit me wonderfully were a 12" Novara Bonita (XS WSD) and an XS Titus Racer X (not sure what the inch measurement was, just the size). I definitely think it sounds like your bike is too large a frame for you. Another nice thing about riding a smaller size is that the bike will be just a little bit lighter.

Good luck with the LBS -- they were irresponsible selling you that bike, I think. My DH is 5'10" and only rides a 19", by the way!