With damage not described, you will likely get a full refund, and the bay will handle return shipping.

I bought a frame a while back that had undisclosed rust thru the top tube and shot (Italian) bottom bracket threads, both unmentioned in ad text and neither factor photographed, either. It probably helped that the seller was a screaming irrational tool, though. He continued bothering me after resolution and ebay eventually stripped away his power seller status. Now and again I run into his auctions, and he seems to be behaving himself since.

I had to leave a brutal neg on his feedback. He left a howling "positive" on mine; I would have gladly taken a neg from him, but ebay doesn't allow sellers to drop them anymore. I could get his "positive" removed, but it makes him look like a flaming idiot, so I left it.

Your seller seems much nicer, at least. Let the resolution play out-- I think he at least seems comfortable with the bay acting as a mediator, since he suggested it. Asking for a mediator is in my view positive behaviour.