Cyprus and Cyprus alone will have to deal with the repercussions of the bailout. If they cannot live with the result, they should be able to reject the bailout. It is not up to others to interfere with financial problems of another country in such a personal financial way. Cyprus should be able to decide what is the best way to deal with the problems they face. No on should be able to force their solution on Cyprus. It is not the democratic way.
Cyprus and Cyprus alone will have to live with the repercussions of the bailout. Therefore, I believe that Cyprus should have the right to reject the bailout if they cannot live with what is decided. They should know what they and their country will have to do to get its affairs back in order. No one else should be able to make such personal and financial decisions for anyone or any government that is not of their own choosing.
I think that Cyprus would be much better off if it did not accept the bailout that has been proposed. There are much better things to be done instead, even if things will actually feel a bit more worse for the country as a whole in the short term time period.
I guess this question really has come a bit too late to be decided on, since Cyprus at this point has already accepted the bailout that has been offered to it. I think that they should not have done so, because they have to give up a lot to accept it.
If Cyprus rejected the bailout in total there would be a failure of the Cypriot economy. Banks would definitely fail after the government defaulted on debts. And while the fact that Cyprus is such a small economy would help it recover from the disaster that leaving the Euro or default would cause, leaving the Euro would be a disaster because Cyprus is so dependent on trade due to its small size while default would likely result in bank failures that would leave depositors uncompensated. Even so, they may negotiate further with the EU. Nobody wants a bank run.