Well, they have the tracking number. They could check the USPS tracking website that says the thing was returned to the seller.
When you called ebay did you speak with a supervisor? Or just the first CS rep who answered? I would imagine that, like most places, the CS reps are fairly low payed and inexperienced workers who are going off of a script of problems/responses and policies. Once they hear "delivered" they probably revert to their script saying it's done. A supervisor would be needed to take any action outside of the script and normal policy.
...delivered to the seller's address on September 26.
The fact that the seller has had the item back for three weeks and hasn't either re-shipped or refunded your money within that time period would worry me. An honorable seller should feel obligated to do whatever
they can within their ability to resolve the issue.