ray, the paypal I use doesn't have a system that would let events take place like that without some fault on the seller. If the buyer says 'not received' and the seller says 'here's the tracking number or proof of postage', that's it, no refund. If the buyer wants protection from lost in post, they have to demand insurance.
If they say 'item broken' they have to return to seller if seller specifies, using tracking. If seller gets it back and it's not broken, or if it's not sent, no refund.
I find Paypal leans pretty strongly in sellers favour. Afterall, t's the seller that is Paypal's client.
The number of frauds/no shows/ripoffs are overall pretty low. The startling discovery of the Ebay Paypal experiment is just how large a percentage of people are prepared to play by the book.
I bought some rare DVDs off a girl on ebay, they turned up, but one was scratched. I asked for a refund, she offered half, I refused, saying 3/4 were ok, so 1/4 back was ok. She refused, giving me over 1/3 back. When people work with each other and are trusting and communicative, the results can be surprising.
All you have to watch out for really are fakes, and some slight misdescription. Also, the occasional stupid person. I bought a remote controlled glider for my nephew, How would you send it (big glider)? Dismantle it, right? No, he wrapped cardboard round it AS IS. This huge cardboard plane turned up. The postman was nearly in tears.