Don't you dare refund him! This sounds like a bullying tactic by someone who is well aware that they bent the rules. If you have done everything you can to make the transaction successful then just ignore him and he'll almost certainly go away. If the item didn't arrive and you got proof of postage then email a copy to him (don't send the original!!!) and he can take it up with the mail, once it is posted it is not your responsiblity. The only other way he can try and get money is through paypal, but if they didn't cover the transaction then you have no obligation to pay him from your own pocket.
And never mind about not selling through ebay, if you set up the sale there and offered a buy it now option then you can always plead ignorance - someone bought it and a payment appeared in your paypal account, how were you to know he'd not done it "officially"???