Looks like it had delivery confirmation on it.. That's what paypal is concerned with, correct? Whether it got delivered or not. So it's not necessarily open/shut win for the buyer I would think.

That stinks man. If the dude is from these forums, definately invite him to explain here..
I sell a bit here and there on the net.. but ya, this kind of crap worries me everytime. Especially on ebay, even though I know my stuff is top notch and mailed perfect. Ahhh,
Good luck to you .