paypal wont refund the money until you have recieved the goods back
im having a payal dispute at the minute, and once they agree to it they wont issue the refund until the buyer sends the goods back and he has 10 days to do so
also when i spoke to paypal about it i can also do a counter claim against him to say that the item returned has come back in a different condition from when it was sent etc lol
id still tell him to do one though, but he has to send the goods back before he gets a refund