Because of this misrepresentation, I'm going to be filing a claim with paypal and,
potentially, with my credit card company, seeking compensation for the
damage.
I wouldn't be prepared to say that any substantial dent to the main triangle is merely cosmetic. If you are prepared to say, as that draft letter suggests, that he misrepresented the bike then I believe the seller should be the party to make good on fixing the tube or reimbursing all costs associated with the bike.
I would be really annoyed seeing "
It would always be nice to get used things in perfect condition like new." because there's a long way to fall from "new" to dented frame.
I've found it's often easier to settle for a partial refund than return something as large as a bike. There is the factor of your time to take into account.
+1, if he is willing to send a check for $75 or the actual cost of blowing the dent out and making you whole I'd be happy with it. It's unfortunate that repairing a bike generally exceeds its value.