ok with the plug under the seat plugged in the seatbelt will not retract. i can pull it out and it just hang there and wont hold me in. as soon as i turn the key off, it retracts.

NOW, if I unplug the plug under the seat, the belt behaves normally, however i have the dummy light constantly on, on the dash.

WTF is going on?

It could be that the buckle is clogged with dirt, lint or rust. If you cannot clean it and start it working, replace it. They sell them in couples, though. Now, I would dislike for you to be almost late for work and have that buckle keep so you cannot get it off.